Insights

Nighat Sahi

Published 6 September 2023
B0BEFAB3-7AF0-49F8-86B2-AD99CC6EC993
image

The Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023 received Royal Assent in May 2023 and is now expected to come into force next year. It will mean significant changes for employers and employees when it comes to handling staff tips, placing new requirements on how they are distributed.

The purpose behind the Act

The stated purpose of the Act is “to create a legal obligation on employers across sectors to allocate all tips, gratuities and service charges which they are paid or which they exercise control or significant influence over to workers without any deductions. The Act also requires employers to ensure that the distribution of qualifying tips between workers is fair.”

The “fairness” aim is to make sure workers get the tips that were intended for them and to make sure all employers follow the same rules.

The new provisions

The Act creates a new legal obligation on employers to give all qualifying tips, gratuities and service charges to their workers. These cannot be subject to any deductions beyond those required by law, and must be paid to the workers by the end of the month following the month of receipt from the customer. The money must also be given to those workers at the establishment in which they were earned. Employers will not be able to pool tips and redistribute them among non-service staff.

Employers (where workers receive tips on more than an occasional and exceptional basis) will have to have a clear and fair written policy detailing how qualifying tips will be handled. This policy will have to comply with a statutory Code of Practice (that is going to be issued). Employers will also have to maintain a record of how tips were distributed for three years following their receipt.

Employees will be able to make a claim in the Employment Tribunal in respect of the allocation of tips where employers fail to comply, and a new remedy is to be created. However, the claim will need to be made within 12 months (as opposed to three years). If asked, employers will have to disclose records of the qualifying tips that they have received and how they have been allocated pursuant to a new right to request more “tipping” information.

Comment

The Employment (Allocation of Tips) Act 2023 is in part a response to the fact that tips are increasing left by credit card and therefore go straight to the employer. The Government estimates, “millions of UK workers will take home an estimated £200 million more of their hard-earned cash”.

Employers will need to take action to ensure they are compliant. A good starting point is to review current practices and of course to ensure that there is an appropriate policy in place.

If any of the above affects you, or you would like to discuss how to ensure compliance, please get in touch by calling on 020 3988 0170 or email us at nighat@rswlaw.co.uk. We will also keep you informed of any further actions that are introduced.

The legal content provided by RSW Law Limited is for information purposes only and should not be relied on in any specific case without legal or other professional advice.

Copyright is owned by RSW Law Limited and all rights in such copyright are reserved. Material is not to be reproduced in whole or in part without prior written consent.