The Employment (Allocation of Tips) Act 2023

The new legislation will make it unlawful for businesses to withhold tips from their employees and ensure tips are distributed to staff without any deductions. This will provide protection to many hospitality workers who rely on tips to make up their earnings.

In 2015, the government found that around two thirds of employers in the hospitality sector were making deductions from staff tips. The new legislation looks to impose legal obligations on employers to ensure that:

• 100% of tips are paid to workers in full (except any deductions for tax and NI);
• Tips are allocated fairly between workers at that place of business;
• Tips are paid to workers no later than the end of the month following the month in which the payment was made by the customer;
• Employers have a clear written policy on dealing with tips; and
• A three-year record showing how tips have been dealt with is kept by employers.

If an employer fails to comply with its obligations on dealing with tips, a worker can issue a claim in the employment tribunal.

The Act is not expected to come into force until 2024, however, employers should begin to review their policies on tips in advance of the legislation coming into force to ensure they remain compliant.

How can Ellis Jones help?

Our Employment Team offers a wide range of services from contract reviews to assisting with Employment Tribunal claims and we are very happy to carry out a free health check of your existing employee contracts or policies. If you would like to discuss this with us, please do not hesitate to get in touch with Kate Brooks, Partner and Head of our Employment Team on kate.brooks@ellisjones.co.uk or 01202 057754.