Employment law for hospitality businesses

Employment law in hospitality

The hospitality sector has some of the most complex employment considerations of any UK industry, with specific regulations around tips, safeguarding, pensions and working patterns.

All standard employment law applies (contracts, National Minimum Wage, holiday pay, etc.), but this guide focuses on the hospitality-specific requirements and considerations.

Fair distribution of tips and service charges

Since October 2024, strict rules govern how tips, gratuities and service charges must be distributed to workers.

Employment (Allocation of Tips) Act 2023

Employers must ensure that all tips, gratuities and service charges are distributed fairly to workers without deductions (except taxes). A statutory code of practice came into force in October 2024, requiring tips to be allocated by the end of the following month.

Fair distribution of tips

Employers must ensure tips are allocated in a fair and transparent manner among workers. Tips include:

Cash tips left by customers
Card tips and service charges
Digital tips via apps or payment platforms

Key requirements

No employer deductions: Employers cannot deduct anything from tips except for tax and NI
Allocation deadline: Tips must be allocated to workers by the end of the month following receipt
Written policy: Employers must have a written policy on how tips are allocated
Record keeping: Keep records of tips received and how they were allocated for 3 years

Tronc schemes

Many hospitality businesses operate a tronc (an independent arrangement run by a troncmaster who allocates tips). Tronc schemes have tax advantages as tips paid directly to workers via tronc are not subject to employer NI.

Worker requests for information

Workers have the right to request information on how tips are allocated and the employer must respond within 28 days.

Employment tribunal claims

Workers can bring tribunal claims if employers breach the rules. Tribunals can order payment of sums due and award compensation.

Step 1: Draft a written tipping policy explaining how tips, gratuities and service charges are allocated
Step 2: Ensure tips are allocated fairly among workers (consider role, hours, seniority)
Step 3: Do not make any deductions from tips except tax and NI
Step 4: Allocate tips by the end of the month following receipt
Step 5: Keep records of all tips received and how they were distributed for 3 years
Step 6: Make tipping policy available to all workers
Step 7: Consider establishing a tronc scheme to reduce employer NI liability
Step 8: Respond to worker requests for tipping information within 28 days

Tips, gratuities and service charges

Workplace pension obligations

Despite high staff turnover, hospitality employers must operate a workplace pension scheme and auto-enrol eligible workers.

Auto-Enrolment Pension Scheme

Auto-Enrolment Pension Scheme - Workplace pension (5+ employees)

Regulator: The Pensions Regulator
Typical fee: Pension scheme fees vary
Frequency: ongoing
Legal basis: Pensions Act 2008

Required to auto-enrol eligible workers (22+ to State Pension age, earning £10,000+) into workplace pension. Minimum contributions: employer 3%, employee 5% (total 8%). Must declare compliance to The Pensions Regulator. Re-enrolment every 3 years. Significant penalties for non-compliance.

Safeguarding and DBS checks

Family hotels, venues with children's facilities, and hospitality businesses where staff have unsupervised contact with children should consider enhanced DBS checks.

DBS Check (Enhanced)

DBS Check (Enhanced) - Working with vulnerable groups (staff with access to children)

Regulator: Disclosure And Barring Service
Typical fee: £52 Enhanced check, £61 Enhanced + barred list
Timeline: 2-4 weeks
Frequency: per employee
Legal basis: Safeguarding Vulnerable Groups Act 2006

Not mandatory for all hospitality roles but strongly recommended for staff with unsupervised access to children (family hotels, play areas, kids' clubs). Enhanced check for regulated activity with children. Some roles legally require barred list check. Update Service available for ongoing checks.

Equality Act and reasonable adjustments

Hospitality businesses must not discriminate against disabled customers and must make reasonable adjustments to premises, policies and services.

Equality Act 2010 (Accessibility and Reasonable Adjustments)

Service providers, including hospitality businesses, must not discriminate against disabled customers and must make reasonable adjustments to ensure disabled people can access services. This includes physical adjustments to premises and policies.

Duty to make reasonable adjustments

The Equality Act 2010 requires service providers to make reasonable adjustments for disabled people in three areas:

Policies and procedures: Change practices that make it difficult for disabled people to use your services
Auxiliary aids: Provide additional equipment or services (e.g. hearing loops, large print menus)
Physical features: Remove, alter or provide reasonable means of avoiding physical barriers

What is 'reasonable'?

Reasonableness depends on:

Effectiveness of the adjustment
Practicality of making the adjustment
Cost and resources available
Size and nature of your business
Disruption that would be caused

Examples of reasonable adjustments in hospitality

Installing ramps or lifts for wheelchair access
Providing accessible toilets
Offering menus in large print or Braille
Allowing assistance dogs
Training staff on disability awareness
Providing quiet areas for customers with autism
Making adjustments to policies (e.g. allowing support workers to enter free)

Protected characteristics

The Equality Act protects people from discrimination based on:

Age
Disability
Gender reassignment
Marriage and civil partnership
Pregnancy and maternity
Race
Religion or belief
Sex
Sexual orientation

Step 1: Review your premises for physical accessibility barriers (steps, narrow doorways, toilets)
Step 2: Consider installing ramps, accessible toilets, hearing loops, and clear signage
Step 3: Create large print or digital versions of menus
Step 4: Train staff on disability awareness and how to assist disabled customers
Step 5: Review policies to ensure they do not discriminate (e.g. allowing assistance dogs)
Step 6: Display information about accessibility features on your website and at entrance
Step 7: Consult with disabled customers to understand barriers they face
Step 8: Make ongoing improvements as resources allow
Step 9: Keep records of adjustments made and requests received

Equality Act guidance for service providers

Managing hospitality workforce challenges

High turnover and recruitment costs

The hospitality sector has significantly higher staff turnover than other industries (52% annually). This creates constant recruitment and training costs. Consider:

Structured induction programmes to reduce early leavers
Career progression pathways to retain good staff
Competitive pay above minimum wage to attract candidates
Flexible working arrangements where possible

Variable hours and zero-hours contracts

Many hospitality roles involve variable hours due to fluctuating demand. If you use zero-hours contracts:

Clearly communicate that hours are not guaranteed
Do not include exclusivity clauses (these are unenforceable)
Calculate holiday entitlement based on hours actually worked
Remember workers still qualify for workplace pensions if they meet earnings thresholds

Young workers and licensing implications

You can employ 16-17 year olds in licensed premises, but they cannot sell or serve alcohol. Under-18s working in hospitality must not:

Work more than 8 hours per day or 40 hours per week
Work between 10pm and 6am
Work without a 30-minute break after 4.5 hours

Right to work and immigration

Hospitality relies significantly on migrant workers. You must conduct right to work checks on all employees before they start.

Civil penalties for illegal working

Civil penalties for employing someone without the right to work in the UK, including penalty amounts and statutory excuses. Effective 13 February 2024.

Employers who employ someone who does not have the right to work in the UK face significant civil penalties. These penalties tripled on 13 February 2024 as part of the government's illegal migration measures.

First breach: Up to £45,000 per illegal worker (increased from £15,000)
Repeat breach: Up to £60,000 per illegal worker (increased from £20,000)
Effective date: 13 February 2024
Fast payment reduction: 30% reduction for first-time breach if paid within 21 days

How to avoid penalties

Employers can establish a statutory excuse against civil penalties by conducting right to work checks before employment begins. The excuse is maintained by conducting follow-up checks for those with time-limited permission to work.

Penalty amounts

The Home Office determines the exact penalty amount based on factors including:

Whether it is a first or repeat breach
Number of illegal workers employed
Whether the employer has a previous history of non-compliance
Cooperation with the investigation

Maximum penalties apply: £45,000 per worker for first offences, £60,000 per worker for repeat offences.

Civil penalties for employing illegal workers

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Employment law for hospitality businesses

Employment law in hospitality

Fair distribution of tips and service charges

Workplace pension obligations

Safeguarding and DBS checks

Equality Act and reasonable adjustments

Managing hospitality workforce challenges

High turnover and recruitment costs

Variable hours and zero-hours contracts

Young workers and licensing implications

Right to work and immigration

Compliance Assistant

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Employment law in hospitality

Fair distribution of tips and service charges

Workplace pension obligations

Safeguarding and DBS checks

Equality Act and reasonable adjustments

Managing hospitality workforce challenges

High turnover and recruitment costs

Variable hours and zero-hours contracts

Young workers and licensing implications

Right to work and immigration

Related guides in Employers Liability

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