Allocation of Tips

Allocation of Tips

Allocation and Payment of Tips

The first of many new pieces of legislation making changes to employment law has been published.

As the name suggests, the Employment (Allocation of Tips) Act 2023 concerns the treatment of tips. It introduces a number of obligations on employers and comes into force on 1 October 2024.

Regardless of how tips, gratuities or service charges are received (whether by the individual directly or paid to the employer), all of that money must be paid to the workers. The Employer is responsible for ensuring that money is allocated fairly and transparently. A new Code of Practice must be followed when deciding what is a fair allocation. The Code doesn’t dictate how tips must be allocated, for example whether tips given to waiting staff must be split with kitchen staff. It does however suggest factors to take into account, such as the type of role or work done, seniority, whether it is individual or team performance.

The money must be paid by the end of the month after the month in which the tip was paid by the customer.

If they don’t already, Employers must keep a record of tips received and paid for three years from the date the tip was paid, and workers are entitled to a copy of their record if they ask for it.

Where workers believe they are not receiving the tips they are entitled to, or not receiving within the time they are payable, they will have the right to bring an Employment Tribunal claim.

When tips are received more than just occasionally, an Employer must have a tipping policy covering whether they require or encourage customers to pay tips, how tips are accepted, allocated and distributed and how they ensure tips are handled fairly and transparently.

Even if a policy is not required, if tips are occasionally received an employer must let workers know that they are not required to have a written policy and why they are not required to have a policy.

The Code of Practice can be found here https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice and if you need any guidance on preparing for the new law or assistance with preparing a policy, get in touch.