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A recent report reveals that only 28% of UK hospitality businesses are ready to comply with the new tipping laws set for October. The Employment (Allocation of Tips) Act 2023 mandates that employees receive all customer tips, prohibiting businesses from taking a cut. Currently, 63% of businesses still take a share, with 29% using tips to cover costs and 28% profiting directly.

The legislation, intended to ensure fair tip distribution, is anticipated to cost businesses significantly. Compliance costs are expected to be at least £12,000 annually for most, with some facing up to £360,000. The delay in the law’s implementation from July to October aims to give businesses more time to adjust.

Additionally, the report, commissioned by Three Rocks, highlights the lack of transparency in tip distribution. Nearly half of hospitality workers are uninformed about how their tips are managed, and 37% believe they should receive more. There is strong support from both operators and staff for a standardized tipping practice, favoured by 73% of surveyed customers.

Scott Muncaster, managing director of Three Rocks, warns that the new costs could push many businesses to their limits. The government has published a code of practice to aid businesses in preparing for these changes.