The Employment (Allocation of Tips) Act, which received Royal Assent on 2 May 2023, is a new law that addresses the fair distribution of tips in the hospitality industry. It aims to ensure that all tips are distributed fairly among staff and paid in full without any deductions. It is currently due to come into force in 2024.
Under the Act, employers must pass on 100% of tips to their staff, except for deductions required by tax law. A statutory Code of Practice on Tipping will outline the principles of fairness and transparency that employers must follow. Employers must have a written policy on tips, distribute them fairly, and keep records for three years.
Workers will have the right to request information about their employer’s tipping record, and employers must respond within four weeks. Agency workers will also receive the same protections as regular workers. Any breaches of the rules may result in workers filing claims in the Employment Tribunal.
The Act addresses the practice of some businesses retaining card tips instead of passing them on to staff. It also considers the “total amount” of tips, including deductions for bank or administrative charges, such as credit card processing fees. While the Act aims to protect workers, it may impose additional burdens on hospitality businesses, especially given the current cost of living crisis.
The commencement date for the Act will be announced later this year, along with the development of the Code of Practice. Therefore, employers should review their tipping policies and practices to ensure compliance with the upcoming changes. Please contact the team for any further queries or if you feel you may benefit from legal advice with regards to compliance of the Act.
If you would like any more information about the impact of the Employment (Allocation of Tips) Act on Employment Law, please contact a member of the Employment Team at [email protected].
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