These changes to tipping laws which came into effect on 1 October 2024 require employers to pass on 100% of any tips and/or service charges to employees without deductions.
The Employment (Allocation of Tips) Act 2023 and the statutory Code of Practice have made a number of changes to standardise tipping practices as well as making it more transparent across the hospitality industry.
Key features of the act include:
- the requirement of a written policy in the allocation of tips
- ensures that all employees receive their tips in full, so no deductions can me made for administration fees, credit card charges or till shortages
- tips are to be paid by the end of the month following receipt
- tips are to be paid to the employees are the place where the tip was received as opposed to sharing them across the group
- agency workers and those on zero hours contracts are also to be included in a share of any tips given during their shifts.
Non-compliance
The Act means that any employer who breaks the law and retains tips could be taken to an employment tribunal and claim up to £5,000 compensation.
In addition, employers could also be made to pay fines.
Most employers already pass on tips to the employees who earn them however, the new law will seek to clamp down on businesses who continue unacceptable tipping practices.
Statutory Code of Practice
The statutory Code of Practice on Fair and Transparent Distribution of Tips also published and comes into force on the same day as the new legislation.
The Code provides guidance on what fairness is for the purposes of the Tipping Act, the areas in which employers need to make decisions to comply with the new legislation and how they should apply these changes across their specific places of business.
Next steps
Employers should take steps to review their tipping policies and if there is not a policy in place, a policy needs to be introduced. Employers need to ensure that they are compliant with new legislation and where appropriate, are encouraged to consult their staff to reach some kind of agreement on the criteria they should use.
For help with tipping and implementing policies, or any other employment matters, please get in touch with our friendly team.
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