Tipping transparency

The Employment (Allocation of Tips) Act 2023  comes into force on 1 October 2024.

The Act (and related Code of Practice) will regulate how employers allocate tips, ensuring workers (including eligible agency workers) receive their tips, gratuities, and service charges in full, allocated fairly and transparently.

Is your business ready?

As an employer, you will need to:

• Pay any qualifying tips, gratuities, and service charges in full by the end of the month following the month in which the customer paid the tip. For example, if a customer leaves a tip on 18 August, it must be distributed by 30 September.
• Consider the Code of Practice on Fair and Transparent Distribution of Tips (the Code) and apply its principles to allocating and distributing tips between workers. 
• Where qualifying tips, gratuities and service charges are paid on more than an occasional and exceptional basis:
  • have a written policy setting out how tips are dealt with and make the policy available to all workers; and
  • keep records of tip allocation for three years, making those records available to workers on request.
• If fair, arrange for an independent tronc operator to allocate all or part of the qualifying tips, gratuities, and service charges between workers.

What if you get it wrong?

Workers will have twelve months to complain to an employment tribunal where there has been a failure to comply with the obligations regarding the allocation or payment of qualifying tips.

The tribunal will be able to order you to:

• revise the allocation of tips
• make a payment to all affected workers
• pay compensation of up to £5,000 for any financial loss

Workers will also be able to complain to an employment tribunal within three months if you fail to comply with your duties regarding policies or records. A tribunal may order you to comply and may also order compensation of up to £5,000.

Failure to comply with the Code will be admissible in evidence in employment tribunal proceedings and tribunals will be required to take it into account.

Comment

You probably already have procedures in place for the allocation of tips.

It is advisable to review the Code to check whether your current procedures comply with it, make any necessary changes, and ensure that any written policy reflects them (introducing a written policy if one isn’t currently in existence).

You should also ensure that you have a good process for recording tip allocation and that these records are retained for three years after the allocation.

For more information about this article or any other aspect of people services reimagined, download our App for Apple or Android, and contact your integrated HR, employment law and health & safety team at AfterAthena today.