New tipping law ‘could cost customers more’ says expert | Personal Finance | Finance

A new law, known as the Tipping Act, came into effect on Tuesday, ensuring that hardworking employees receive their fair share of tips – but it could drastically alter customers’ experiences in pubs, restaurants, hairdressers and other businesses.

The legislation, which came into force on October 1, governs how tips are received and distributed by businesses, aiming to bolster workers’ rights to their tip money and is projected to put an additional £200million back into their pockets.

The law mandates that companies must pass on 100% of all tips, gratuities and service charges to the deserving 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.

While most employers have already been adhering to this rule as part of an ethical code before it became law, the legislation will clamp down on businesses that don’t comply, potentially significantly impacting a customer’s experience at certain establishments.

Customers probably won’t need to alter how they tip at these venues, but may notice a considerable difference in price in the coming months.

The law compels businesses to align with public demand for transparency and employees’ desire for fairness but could result in venues increasing prices, adjusting service charges, or employing other strategies to cover the costs previously met by these tips.

This is particularly anticipated to be the case for smaller businesses that may have been using service charges to cover sundry expenses like card transaction charges.

Sacha Zackariya, the mind behind ‘Leading Travel and Tourism Retail’, revealed to the Express that the surge in service charges in recent times could be a strategic move by some businesses to offset their own rising costs.

By implementing this strategy, they’ve managed to maintain consumer-friendly price tags, with the service charge making up the shortfall—a practice that will undoubtedly face upheaval and possibly require a complete overhaul in light of new legislation.

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.”