This year will see new rules introduced for managing staff tips. It is expected that the Employment (Allocation of Tips) Act 2023 comes into effect on 1 July 2024 which will require all employers to manage their staff tips in line with a fair and consistent criteria.
Currently, when staff receive tips from customers, some businesses keep those tips and reinvest them back into the business rather than distributing them amongst their staff for whom they were originally intended. Whilst this is not unlawful, morally you would have to question those businesses as many staff lose out on hard earned money that the customer has paid to that individual for the service that they have provided. However, under this new legislation, the business would no longer be able to retain and keep those tips intended for their staff. Instead, the business will have to ensure that all of their staff (including Agency Workers) receive their tips in full.
This new law will affect any business that accepts and manages tips including but not limited to:
- Hotels
- Restaurants
- Gambling and betting outlets
- Hairdressers or other beauty businesses
- Taxi companies
- Cleaning Services
The government has released a draft code of practice to help all those affected businesses allocate tips fairly (this is still in draft and not yet finalised). Within this guidance it outlines what counts as a tip and how the business can distribute it fairly as well as detailing around keeping a written tipping policy and record keeping.
The code of practice outlines that businesses should:
1. pass on all tips and service charges to workers without deductions, except in very limited scenarios, such as deduction of income tax
2. ensure that tips are distributed in a fair and transparent manner when the employer takes control, or exerts significant influence, over their distribution
3. have regard to this code of practice on fairness and transparency of tip distribution when they are distributing or influencing the distribution of tips
4. maintain a written policy on how tips are dealt with at their place of business, and ensure this policy is made available to all their workers
5. maintain a record of all tips paid at their place of business and their allocation and distribution between each worker, to which workers have the right to request access
The Act amends the Employment Rights Act 1996.
Going forward, businesses need to ensure that they read the code of practice and start preparing for the law coming into effect. This is an ideal time, along with the other recent changes to review the staff handbook and implement new policies and procedures.
For help or advice on new policies and procedures or any other employment law matters, please speak to Emma-Louise Hewitt e.hewitt@sydneymitchell.co.uk 08081668860.
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