Over two-thirds of UK hospitality businesses could suffer a financial hit later this year when the laws on tipping change.
Only 27% of UK companies in the industry were found to have been “currently compliant” with the upcoming Employment (Allocation of Tips) Act 2023, research from hospitality data firm Three Rocks revealed.
Set to come into force in October, the new law makes it illegal for employers to take a percentage of their staff’s tips.
Of the 63% of non-compliant hospitality firms, a little under a third dip into the tip jar to cover costs related to the payments such as processing fees.
Meanwhile, 28% say they take a profitable share of gratuities.
When the law comes into effect, 83% of businesses are expecting to incur costs of as much as £12,000 a year, while a further 18% claim the loss of tips could cause between a £60,000 and £360,000 hit.
"This legislation, although introduced with good intentions, could push many businesses to breaking point," Scott Muncaster, founder and managing director of Three Rocks said.
"The reality is that increasing costs by tens of thousands of pounds a month isn't viable for many in the current climate.”
The new law was originally set to come into effect in July, but the UK government decided to extend it until October to help businesses prepare for the changes.
Despite some businesses expressing concerns about the loss in cash, the overwhelming response from the industry has been positive.
Last year when the bill was passed, UKHospitality boss Kate Nicholls said: “We’re pleased to support this new piece of legislation… Fantastic hospitality experiences don’t happen without a huge effort from our teams, both front and back of house.
“Tips are just one part of what makes working in hospitality a great job and career.”