
From 1 October 2024, the Employment (Allocation of Tips) Act 2023 and the statutory code of practice introduce rules that require employers to be fair and transparent in how they manage and distribute tips.
It affects various businesses such as restaurants, hotels, hairdressers and other similar services industries.
The Employment (Allocation of Tips) Act 2023 and its accompanying statutory code of practice cover England, Wales and Scotland.
The Act and code of practice do not apply in Northern Ireland.
Employers should be aware of potential indirect discrimination claims, if a criterion means that fewer tips are allocated to a group of workers that contains a disproportionate number of individuals with a particular protected characteristic i.e. distribution based mainly on length of service is potentially discriminatory against younger workers unless it can be justified.
The new rules on the fair and transparent allocation of tips apply to “qualifying tips, gratuities and service charges”. This means either:
When considering whether a tip is a qualifying tip under the legislation, it makes no difference what the employer calls the payment, whether that is a “tip”, “gratuity” or “service charge”; and how the payment is made, whether that is by cash, credit card, debit card or via a digital platform.
A payment in the form of an item that has a monetary value and can be exchanged for money, goods or services is a qualifying tip. For example, a shopping voucher in retail would be a qualifying tip.
Tips that are given directly to the worker and that they are entitled to keep are not caught by the legislation because the employer does not control or influence how they are shared.
The Employment (Allocation of Tips) Act 2023 makes it is a specific legal requirement for affected employers to have a written tips policy in place, which must be made available to all workers at that place of business. This includes agency workers.
The Employment (Allocation of Tips) Act 2023 nor the accompanying statutory code of practice is prescriptive about how tips are allocated. There is no obligation on employers to distribute tips evenly between all the workers at a particular location – although some employers may wish to opt for an even distribution as it may be simpler to implement.
The statutory code of practice states that some of the criteria that employers may take into account when allocating tips are:
For an employer that uses an independent tronc operator to distribute tips, the employer is generally deemed to be allocating tips fairly.
However, an employer that engages an independent tronc operator is still expected to apply the principles of fairness to any instructions or framework that it sets for the tronc operator; and take action if it becomes aware that the tronc operator has acted unfairly in the allocation of tips.
While it is left to employers to decide how to allocate tips, certain principles come employers should note the following:
Under the new laws, employers are required to keep records of tips for three years, beginning with the date on which the tip was paid to the worker.
Staff have a new right to request access to the employer’s tipping records, which means that affected employers need to put in place a right-to-request process.
The new right includes the right to see information dating back three years on the total amount of qualifying tips received by the employer at the place of business; and the total amount of qualifying tips paid to the individual who has made the request.
Staff can make only one such request in any three-month period. They can make requests only for periods during which they worked for the employer.
A worker is not entitled to access the information about the qualifying tips paid to any other member of staff and the employer has four weeks from the date of the request to provide the information.
For support and guidance on the new allocation of tips contact a member of the team on contact@davenportsolicitors.com or 02079036888.
Disclaimer
The material contained on this website contains general information only and does not constitute legal or other professional advice and should not be relied upon as such. While every care has been taken in the preparation of the information on this site, readers are advised to seek specific advice in relation to any decision or course of action.