Is your business ready for changes to tipping laws?
27 September 2023
The Employment (Allocation of Tips) Act 2023 (“the Act”) received Royal Assent on 2 May 2023 and the substantive provisions of the Act are expected to be brought into force in 2024, following a consultation and secondary legislation.
This new legislation is expected to have a significant impact on the hospitality, leisure and services sectors. More than two million employees, workers and agency staff working in restaurants, pubs, cafés and other workplaces will have their tips protected, amounting to an estimated £200 million a year.
Under the Act, employers will be required to fairly allocate tips over which they exercise control (or significant influence) and pay them to their staff no later than the end of the month following the month of payment by the customer.
Written policy and record-keeping
It is common in the hospitality and leisure industry for tips to paid on more than an occasional and exceptional basis. Where this is the case, under the new rules, employers must have a transparent policy on dealing with qualifying tips, gratuities and service charges and a mechanism for accurate record-keeping.
The written policy must include information on whether the employer requires or encourages customers to pay tips at the place of business and how the employer ensures that all qualifying tips paid at, or otherwise attributable to, the place of business are dealt with in accordance with the legislation.
Records must be kept which show how every qualifying tip paid at, or otherwise attributable to, the place of business has been dealt with in accordance with the legislation and must be maintained for a period of three years following the date of the payment. Employers should be aware that employees, workers and agency staff may make one written request in any three-month period to see these records, which employers must provide (subject to compliance with data protection legislation) within a reasonable time period.
Next steps for employers
The measures in the Act will be supported by a statutory Code of Practice on the fair and transparent distribution of qualifying tips. All employers should be careful to follow the measures as a failure to do so may be used as evidence in the employment tribunal. This Code is expected to be subject to formal consultation later this year, with employers being encouraged to take part in the consultation to ensure it is clear and effective.
All employers in industries where tips, gratuities and service charges, as defined within the Act and Code of Practice, should review their current practices and consider how these will be affected. If these types of payments take place on more than an occasional and exceptional basis, employers should start to consider how they might prepare to put in place the required written policy and robust record keeping systems, guided by the statutory Code of Practice when it is published.
Enforcement and compensation
Under the legislation, complaints to the employment tribunal may be brought in respect of non-compliance by employers and agents. If the employment tribunal finds in favour of the employee, worker or agency worker, a declaration will be made, and the employer may be ordered to pay up to £5,000 to compensate the complainant for any financial loss they have sustained. Employers may also be ordered to comply with their obligations under the Act, including the requirements for a written policy and record-keeping.
We are here to help
Our hospitality and leisure employment specialists will be happy to advise any employers who are preparing for the new requirements, or who have other questions relating to their policies and procedures.
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Rebecca Hughes
Services
Sectors
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2023.