
Insight
The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024. This sits alongside the code of practice on fair and transparent distribution of tips.
For qualifying tips incurred from 1 October 2024, employers have a duty to allocate tips among workers in full. Agency workers are also entitled to receive tips. It is unlawful for employers to withhold tips or make deductions before paying these to workers.
A ‘qualifying tip’ for the purposes of the legislation includes tips, gratuities and service charges which an employer exercises control or significant influence over. This includes situations where employers tell staff how to distribute cash tips or if they collect cash tips and distribute them at the end of a shift or as part of the regular payroll. Tips received by card are still qualifying tips.
Tips must be allocated in a fair and transparent way. The code requires employers to:
The code provides an illustrative list of factors for employers to consider when deciding on a ‘fair’ allocation of tips, such as:
The code also provides guidance on what ‘transparent’ means. Employers are required to have a written tipping policy which should be accessible by all staff. An employer will not have met its obligation to handle tips fairly and transparently if individual workers are not aware of their entitlements in line with the policy.
Employers could be liable in the employment tribunal for a failure to comply with their obligations to allocate tips. Employers should:
Further non-statutory guidance was published last week which expands further on the Code and how employers can comply, see here.
Please do not hesitate to contact a member of the Employment team at Thomson Snell & Passmore if we can assist with helping your business to comply with these new rules.