Brand fees: a fad or lasting impact of the forthcoming Tipping legislation?

30th July 2024

Employment law, Newbury, Berkshire.

The Employment (Allocation of Tips) Act 2023 has not yet been enacted (it is expected to come into force 1 October 2024), but it is already making waves in the hospitality industry. 

Under the new legislation, employers will have a duty to ensure that all qualifying tips are ‘allocated fairly’ to workers (including agency workers). Alternatively, if it is fair to do so, the employer may pay the tips over to an ‘independent tronc operator’ who will allocate them to workers. The introduction of a legal obligation to allocate tips fairly has the potential to increase the administrative burden on businesses (if they need to introduce a new way to ensure the fair allocation themselves) or result in increased costs (if they decide to engage the services of a tronc operator). 

A trendy London restaurant chain has been trialling a novel way of working around this issue – but it is a distinct move away from tipping. City A.M. reports that Ping Pong, which has five outlets across London, is testing a new policy under which it will no longer allow customers to tip by card, although they will still be able to pay tips in cash. The optional service charge of 12.5% (90% of which was allocated to staff) will no longer be applied to customer bills and instead, the restaurant will charge an optional ‘brand fee’ of 15% which will go towards franchise fees and other brand-related expenditure. Staff wages will increase by 19% to a minimum of £12.44 per hour, which the restaurant believes will match the earnings staff would have received by tip allocation. It will be interesting to see how many other hospitality businesses follow their lead – and choose to increase wages rather than grapple with the need to allocate tips ‘fairly’ – and this could mean a big change for tipping as we currently know it. 

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