Restaurant diners could be forced to pay more to eat out after a new law on tipping was introduced. The Tipping Act, which governs how businesses receive and distribute tips, came into effect on October 1.
The law is designed to bolster workers’ rights to their tip money and is projected to put an additional £200million back into their pockets. It says that companies must pass on 100% of all tips, gratuities, and service charges to the employees who earned them, with no deductions permitted.
If an employer violates this law by retaining tips or imposing fees, a worker can take their claim to an employment tribunal. But while this is good news for workers, it might not be for restaurant diners.
While many employers already follow this rule, the legislation will clamp down on businesses that fail to do so – potentially impacting the customer experience at certain establishments. Customers are unlikely to need to alter how they tip, but may notice a difference in pricing in the coming months.
It could result in venues increasing prices, adjusting service charges, or employing other strategies to offset the costs previously covered by these tips. This is anticipated to be particularly true for smaller businesses where tips or service charges might have been used to cover miscellaneous expenses such as card transaction charges.
Sacha Zackariya, the writer of ‘Leading Travel and Tourism Retail,’ spoke about the increase in service charges businesses have employed in recent years. Zackariya explained that these charges might have been strategically used by some establishments to absorb rising operational costs in order to maintain low visible prices for customers, reports the Manchester Evening News.
Businesses could offset their increased expenses through the service charge, but with new legislation on the horizon, a thorough revamp may be required, he said. He pointed out: “It’s worth noting that tipping in many other European countries, such as Spain or Italy, consists of a few coins or a low denomination note.
“The flat service charge rate should really be lowered so tourists do not feel they are being ripped off from both the inevitable price increase of the food and drinks. Better to just let them know the true price when they look at the menu – not their bill at the end.”