The Employment (Allocation of Tips) Act 2023 came into force on 1st October 2024.
This new law creates a legal obligation on Employers to allocate all tips, gratuities and service charges that the business receives from customers, to workers, in a fair way without any deductions.
The new law says that Tips must be distributed fairly and transparently between workers (which includes employees, agency staff, casual staff and zero-hours workers). The Government have produced a Statutory Code of Practice giving guidance on the fair and transparent distribution of tips, to help Employers understand the new rules.
Employment Tribunals will be required to take any breach of the Code into account if a worker complains that there has been a failure to comply with the law (a worker has up until 12 months after the failure to pay the tips to make a complaint).
The law applies to all businesses where tips are paid, but is obviously of primary importance to the hospitality industry.
Some important points of the new laws include:
- Workers cannot be asked to forgo (i.e. contract out of) these new rights;
- A “fair” way is not defined in the law, but the Code gives guidance about allocating the proportion to workers;
- Employers should have a policy on tips and how they are allocated, and ensure the policy is available for all staff to read;
- Tips must be paid to the member of staff in the following month the tip was received;
- Employers must keep records of all tips paid to staff for 3 years after they were paid and must make these records available to workers on request (but this is limited to 1 request per worker every 3 months).