Tips on Tipping – Employment (Allocation of Tips) Act (coming into force July 2024)

This summer the United Kingdom will see a huge change in the landscape of tipping, especially within the hospitality industry, among many other service sectors. Businesses will no longer have such a discretion as to how they distribute their tips, and instead will be required to adhere to a new legal framework. Within this article we summarise the key changes that are due to be implemented, and a number of practical considerations that should be at the forefront of any business owner’s mind as the new law becomes the new normal.

Changes to the law

It is expected that from 1 July 2024 the Employment (Allocation of Tips) Act 2023 will require all employers to manage their staff tips in accordance with fair and consistent criteria. The aim of this legislation is to promote “fairness and transparency in the distribution of tips”.  The new law will require employers to distribute any tips that the business receives fairly amongst the workers, including those on zero-hour contracts.

Employees will have a right to request more information in relation to the business’ tipping records, and this request can be made once every three months. Businesses should therefore be aware that this new right could give rise to employees bringing forward credible tribunal claims, and using this information as evidence within the process.

Government guidance

The Government’s code of practice gives guidance on the development of this new piece of legislation. At present, the code is still being consulted, however, the four main principles in relation to future tipping practices are:

1. Written tips policy – this should be accessible by anyone and on public display in work premises. Where tips are being given to staff regularly, the written policy should include details on the allocation of qualifying tips and how they will be distributed.
2. Process – there should be a streamlined process in place to deal with customer requests on how to manage tips and service charges. Businesses should ensure that tips are paid to employees no later than the end of the month, following the month in which the customer paid the tips. If tips are not paid on time a member of staff can potentially claim up to £5,000 compensation.
3. Business policy – staff should understand and be able to explain the business’ policy on tipping, and where to direct customers for further information.
4. Breakdown – staff should receive a full breakdown showing how service charges, tips, gratuities, cover charges and deductions are distributed and why they are distributed in a certain way.

Key considerations at present

• Employers in the hospitality sector (and other similar service sectors) should be analysing their current procedures for managing tips, gratuities, and service charges to ensure they align with the new legislation set to come into force.
• The government’s final Code of Practice will need to be adhered to once the law has come into force. It is important to bear this in mind, be prepared, and take action sooner rather than later.

How can Ellis Jones help?

There are a huge number of changes on the horizon in the Employment Law sphere throughout 2024, and this change is an important one for those service sectors and businesses that are affected by the new legal framework. We often advise clients on the most commercial way to make changes with least disruption and risk to the business.

If you therefore feel that you would benefit from assistance with navigating the changes to your current Tipping Policy, or any other employment law or HR matter, please do contact us on 01202 525333 or by email at employment@ellisjones.co.uk, one of our team would be very happy to assist you.