The Allocation of Tips Act 2023 comes into force on 1st October 2024. Here we outline what the Act is, who it will affect, and what you must do to stay compliant.
What is the Allocation of Tips Act 2023?
This Act outlines new laws around how businesses must distribute any qualifying tips to workers without deductions. This will ensure fairness and transparency, and will mostly affect the hospitality industry.
How Will The Tipping Industry Be Affected?
Employers in tipping industries should already have made the necessary arrangements to ensure that they can comply. As a reminder, the main protection for those workers that are eligible is as follows:
- Employers are under an obligation to ensure that all ‘tips’, including gratuities and service charges, are allocated in a fair manner to workers.
- Employers must make the relevant payments to their workers, in full, by no later than the end of the month following the month that the customer paid the tip.
- An ‘independent tronc operator’, i.e. a third party, can be used by the employer to operate the fair distribution of eligible tips.
- Deductions from tips, apart from those required by law such as tax and national insurance deductions, are prohibited. If there is a deduction a worker can make an unlawful deduction from wages claim to the Employment Tribunal.
- A worker cannot contract out of their rights under the Tips Act.
- A statutory scheme will enable workers to make complaints to the Employment Tribunal if their employer has failed in their obligations under the Act. They must bring a claim within 12 months of their employer’s failure under the Act, and a Tribunal may award up to £5,000 in compensation in respect of financial losses experienced by the worker.
- Employers who pay tips on more than an occasional basis must have a written policy detailing how the tips will be dealt with and allocated.
The government has already published a statutory Code of Practice that all employers in tipping industries will need to familiarise themselves with.
It has recently added non-statutory guidance that includes confirmation tips cannot be pooled across multiple sites or different branches. This is a reminder that employers need to take account of agency workers when considering the distribution of tips, and confirmation that employers are responsible for deciding (and justifying) what roles they treat as being in-scope for the allocation of tips.
The guidance also includes an outline tipping policy and tipping record template that employers may find useful.
Let Howells Guide You Through This Change
If you are involved in an industry where tips are a regular occurrence, you need to ensure that you are ready for the new law and that you can fully comply.
If you have any queries about the Allocation of Tips Act or the Code of Conduct, please contact our friendly and knowledgeable employment law solicitors.
