The Employment (Allocation of Tips) Act 2023, often referred to as the Tipping Act, states that all tips should be passed on to workers without deductions. The Act was originally set to come into force on 1 July 2024 but has now been pushed back to 1 October 2024.
The Clayton & Brewill team explains this new guidance and what it will mean for employers in the blog below.
Why has the Tipping Act been created?
This latest Code of Practice for the fair and transparent distribution of tips was created to combat concerns that employees are losing out on tips, gratuities and service charges left by customers and these were instead being taken by the business.
Currently only cash tips are considered property of the employee, and all credit card tips or service charges belong to the business. This can often result in unfair distribution or employers keeping the tips for themselves, despite most customer leaving tips assuming they will go to the staff member who has supported them. The Tipping Act will also prevent businesses from using tips to supplement wages and will ensure that they pay minimum wage or above to employees.
Time for change
The Act will make it unlawful for businesses to retain tips and they will instead have to be given to employees without any deductions. This will be particularly relevant in the hospitality, leisure and services sectors, but will apply across the board to all industries.
Businesses have been urged by the government to begin following these rules now, despite them not having legal effect until October. It would be good practice for employers to use September to check that everything needed for compliance is in place and ready for the regime before it comes into force the following month.
Employer duties
Under this new legislation, employers must:
- Give all tips to workers without deductions
- Ensure tips are distributed in a fair and transparent manner
- Pay tips to workers by the end of the month following the month in which received, at the latest.
- Have regard to the Code when distributing or influencing the distribution of tips.
- Have a written policy on how the business deals with tips which needs to be available to all workers
- Keep records of all tips paid to each worker, employees have the right to access their own records as well as records of the total received by the employer
Places of work where tips are received by workers without employer control will not be impacted by these new rules and can continue business as before.
