The decision follows a public outcry in 2015, when it emerged that many High Street chains such as Café Rouge and Zizzi routinely took up to 10% of tips paid by credit and debit card.
Most chains have since stopped this practice, typically charging a much lower fee of 2.5% on tips paid by card but there are still fears as to how this cash is being distributed.
In February, staff at restaurant chain TGI Fridays were reported to have staged a series of walkouts over what they said was the company’s unfair tips policy.
Waiting staff at the American chain were told that 40% of the tips they receive via credit or debit cards would be taken from them and given to kitchen staff, instead of the chain giving the latter a pay rise.
Mrs May said the “tough” legislation, which would apply in England, Scotland and Wales, was part of the government’s push to end exploitative employment practices.
“We want to ensure that everyone is treated fairly in the workplace…that’s why we will introduce tough new legislation to ensure that workers get to keep all of their tips – banning employers from making any deductions. It’s another way we are building an economy that works for everyone.”
A Government spokesperson was unable to say whether Theresa May’s proposed legislation would also cover the common practice of customer tips left for waiting staff being redistributed to include back of house staff such as cooks and kitchen workers.
In 2016, former business secretary Sajid Javid launched a consultation into plans to stop employers making deductions from tips, but no legislation was introduced.
The consultation also included plans to ban or restrict the ability of employers to charge a fee to waiting staff based on their sales during a shift. The Government’s response to the consultation has not yet been published.
The proposed legislation comes as controversial news to many in the hospitality sector as it may disrupt business as usual for operators who already follow the industry Code of Practice.
Kate Nicholls, Chief Executive of the Association of Licensed Multiple Retailers (ALMR) explains:
“We developed a Code of Practice – together with Unite – which deals with the fair distribution of tips among all staff, not just waiters”
“As a result, best practice has been promoted across the sector and we see no evidence of tips being withheld across restaurant chains”
“Restaurants may need to retain ‘a small amount’ from card tips to cover the not inconsiderable costs of credit card charges and processing payments”.
Trade Body UKHospitality (UKH) has also warned that any new statutory legislation regarding tipping is an unnecessary burden highlighting voluntary measures already undertaken by the organisation and the wider trade to ensure fair practice.
The British Beer & Pub Association (BBPA) Chief Executive Bridgid Simmonds said the BBPA had always supported the hospitality industry code of practice; which promotes the fair distribution of tipping among all staff.
She added “We would be happy to work with Government to ensure this policy is fair and works in practice.