New legislation is to be introduced that will ban restaurant and pub owners from keeping staff tips and service charge payments paid by card.
The new rules were first proposed in 2016, with Unite the Union saying that the five-year delay had cost waiting staff an estimated £10,000 each in lost tips.
The legislation has been designed to protect around two million waiting staff and other sector workers after a string of hospitality businesses were exposed for failing to pay forward the correct service charge to their team members.
The government said research had shown many businesses that add a discretionary service charge to customer bills were keeping part or all of the money.
Some businesses have used the cash to top up managers’ or chefs’ wages and others have used it to support profits.
While cash tips are already protected by law, the pandemic has spurred legislation to be implemented for card payments, with many venues now switching to cashless payments.
Paul Scully, the labour markets minister, said: “Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service.
“Our plans will make this illegal and ensure tips will go to those who worked for it. This will provide a boost to workers in pubs, cafes and restaurants across the country, while reassuring customers their money is going to those who deserve it.”
Under the law, it will be illegal for employers to divert tips and service charges from restaurant workers and a code of practice is being developed in consultation with workers and businesses on how to fairly distribute the funds.
Those breaking the rules can be fined and forced to compensate workers.
Kate Nicholls, chief executive of UKHospitality, said: “UKHospitality supports the right of employees to receive the deserved tips that they work incredibly hard for. Ensuring employees receive the tips they earn will further strengthen the sector’s ability to create jobs and support the wider economic recovery.
“For hospitality businesses, though, customers tipping with a card incurs bank charges for the business, and many also employ external partners to ensure tips are fairly distributed among staff. With restaurants, pubs and other venues struggling to get back on their feet, facing mounting costs and accrued debts, we urge the Government to continue to work closely with the sector as it introduces this legislation to ensure this works for businesses and employees.”