From 1 October 2024, the Employment (Allocation of Tips) Act 2023 will come into effect. The legislation mandates that employers must ensure workers receive the entirety of any tips left by customers. The new law requires businesses to distribute all discretionary tips, outlines a timeframe for doing so, and sets out the need for a formal policy to ensure fair and transparent tip distribution.
Employers will be required to pay all tips, service charges, and gratuities directly to workers without any deductions, such as administrative fees. Any tips must be distributed to workers no later than the end of the month following the month they were received from the customer. The distribution must follow a fair and transparent process in line with a Code of Practice (COP), which may involve a tronc arrangement.
Employers must have a written policy detailing how tips are handled, including whether customers are encouraged to leave tips and how tips are distributed fairly. Businesses are also required to keep records of tips received and their allocation to workers for at least three years.
Both employees and agency workers are entitled to receive tips under the same terms. Workers have the right to request information about the total tips collected and how much they personally received. In case of disputes, employees and agency workers can raise a claim with an employment tribunal within 12 months.
Not all tips come under the scope of the Tipping Act. If a worker receives and keeps a cash tip, with no employer control or involvement, the tip is out of scope for the Tipping Act. Digital tipping, whereby a customer uses an app to directly tip members of staff, bypassing the employer altogether, is also out of scope.
You can view the full Code of Practice here. Ensure you’re prepared for these changes to stay compliant and promote fairness within your business.
