What is the Employment Act allocation of tips 2023? Government publish non-statutory guidance

This month Nick Hobden, Head of Employment and Employment Solicitor Jessica Wells, delivered an insightful video regarding the Code of Practice governing allocation of tips in the workplace. On 1 October 2024, the Employment (Allocation of Tips) Act 2023 and the Code of Practice came into force.

The new statute provides enhanced protection for workers as they will now receive all tips from customers, whether received by cash or card, and it enables staff to bring a claim to the Employment Tribunal if their employer fails to comply with their obligations regarding allocation or payment of qualifying tips.  A claim may also be brought where there has been a failure by the employer to comply with its obligations regarding a written policy or record-keeping.

In this article, we will explore the non-statutory guidance which has been published to help employers apply the Code of Practice on fair and transparent distribution of tips. The Guidance provides further advice for employers on agency workers, multiple sites of operation, the scope of workers covered by the Code, dealing with disputes and complaints to the tribunal. It also provides helpful examples and templates to assist employers and workers.

Agency workers

The Guidance asserts that employers must take agency workers into account when considering the distribution of tips. Whilst this does not necessarily mean that agency workers should always receive an equal share of the tips, they should not be unduly disadvantaged by virtue of them being engaged by an agency. What is fair depends on circumstances such as the employer and the industry in which the agency worker works within. The Guidance explains that tips may be processed through a regular payroll cycle, or through separate payments of tips made via the employment agency or directly to the worker.

Multiple sites of operation

Tips received at one site should be limited to only being distributed amongst staff at that particular site (for example, where there is a restaurant chain, tips received within one branch should be kept within that branch and not allocated amongst staff within other branches). This means that employers cannot pool the tips received across multiple sites of operation, or different branches.

Scope of workers

The Code of Practice makes clear that all workers who are directly involved in providing a service to customers should be considered in the distribution of tips. Specific circumstances such as the industry and employer should be considered when determining which jobs should be included within the scope of workers.  An example provided by the Guidance is as follows:

Amy is employed as a marketing manager for a group of restaurants. Amy usually works in an office within one of the sites but does not interact with customers during service. It would likely not be permitted for Amy to receive a share of tips collected by the restaurants, as she is not directly providing service to customers.

The decision as to which jobs are included in the distribution of tips should be justified in the employer’s policy.

Templates

The Guidance provides templates for a tipping record, requesting tipping records and a tipping policy. The templates can be accessed here.

If you require any assistance with drafting a bespoke tipping policy, the Employment team at Thomson Snell & Passmore would be happy to assist.

What happens if an employer does not abide by the Guidance? 

The guidance addresses the two types of complaints that can be raised in an employment tribunal under the legislation: failure to distribute and failure of information. Workers can bring claims against employers if they fail to comply with requirements regarding how and when tips are distributed and/or if the employer fails to comply with the requirements surrounding the written tipping policy or tipping records.

Where a failure to distribute has occurred, a member of staff has 12 months from the employer’s failure to comply, or in the event of multiple failures, 12 months from the most recent failure to comply, to bring a claim to the Employment Tribunal. The Guidance does highlight that the time required to consult ACAS early conciliation, does not count toward the 12 months.

If the claim is successful, a worker may be entitled to up to £5,000 compensation and an employer may be ordered to:

• revise a previous allocation
• make a non-binding recommendation on a previous allocation
• pay a worker or workers, which can include other workers who have not made a complaint to the tribunal

Where an employer has failed to comply with the requirements surrounding the written tipping policy and tipping records, a claim must be presented within 3 months of the failure to comply or within 3 months of the most recent failure where there has been a series of failures. Much like a claim for failure to distribute, this could attract compensation of up to £5,000.

If you require any guidance, please do not hesitate to contact the Employment team at Thomson Snell & Passmore.

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