New Legislation on Tips Allocation Set to Come into Force

From 1 October 2024, the Employment (Allocation of Tips) Act 2023 will make it mandatory for all qualifying tips, gratuities, and service charges to be passed on to workers without deductions. Qualifying tips are either received by the employer and then distributed to workers, or received by workers but controlled and re-distributed by the employer.  Tips given directly to workers, and where the employer does not have control, are not covered by the legislation. This significant change ensures that employees in the hospitality and service sectors receive the full amount of tips given in recognition of their hard work. 

Key Provisions of the Act 

• Mandatory Tip Allocation: Employers must distribute all qualifying tips to workers fairly and transparently, without any deductions except for income tax. 

• Enforcement Through Employment Tribunals: Workers can enforce their rights through the employment tribunal system. Judges will consider the statutory Code of Practice when resolving disputes related to tipping practices. 

• Written Tipping Policy: Employers must maintain a written policy detailing how tips are managed and distributed, which should be accessible to all workers. 

• Record Keeping: Employers are required to keep detailed records of all tips received and their distribution among workers. Workers have the right to request access to these records. 

Guidance 

The statutory Code of Practice provides comprehensive guidelines to ensure fair and transparent distribution of tips. Employers will be encouraged to resolve issues internally first, with support from Acas if needed. Non-statutory guidance will also be issued to further aid in interpreting the legislation. 

Impact on workers: 

The impact of the "Code of Practice on Fair and Transparent Distribution of Tips" on workers will be multifaceted: 

1. Fair Distribution of Tips: 

• Increased Fairness: It aims to ensure that tips, gratuities, and service charges are distributed fairly among all staff, including permanent, agency, and zero-hours contract workers. This should help eliminate favouritism and ensure everyone gets their fair share. 

• Transparency: Employers are required to maintain a written policy on how tips are handled and make this policy available to all workers. Workers can request access to records of tips paid and their distribution, enhancing transparency and trust in the system. 

2. Legal Protections and Recourse: 

• Right to Claim: If workers feel their employer has not acted fairly or transparently, they can submit a claim to an employment tribunal. This provides a formal avenue for grievances to be addressed. 

• Support from Acas: Workers can seek support from Acas for mediation before resorting to legal claims, which can help resolve disputes more amicably and efficiently.

3. Inclusivity: 

• Coverage of Various Worker Types: The Code applies to all workers, including agency workers, ensuring they are also protected and treated fairly. This inclusivity helps maintain equity among different types of workers in the hospitality and service sectors. 

4. Preventing Unlawful Practices: 

• Prohibition of Deductions: Employers are prohibited from making unauthorised deductions from tips. Only deductions such as income tax are allowed, protecting workers from unfair reductions in their tip earnings. 

5. Administrative Changes for Employers: 

• Record-Keeping: Employers need to maintain detailed records of tips and their distribution for at least three years. This adds an administrative responsibility but ensures accountability. 

• Regular Reviews: Employers must regularly review their tipping policies and practices to ensure ongoing fairness, adapting to any changes in staff composition to prevent discrimination. 

Impact on Trade Union Representatives 

Trade union representatives should be aware of these changes and consider approaching employers within their allocation to ensure they have a written policy for the distribution of tips in place, which will support their members in understanding and exercising their rights under the new law. Ensuring compliance and advocating for fair tipping practices will be crucial in protecting workers' earnings and promoting workplace fairness.