• 2 min read

Employment Alert - Changes to the allocation of tips

Group Of Friends Paying For Meal In Restaurant

What’s happening?

The Employment (Allocation of Tips) Act 2023 (the Act) received Royal Assent to become law on 2 May 2023. It is expected that the Act will come into force in May 2024.

The first Regulations under the Act came into force on 31 July 2023 enabling the Secretary of State to issue a code of practice on the fair and transparent distribution of tips. The draft code is expected to be published at the end of this year.

Why is this Important?

The Act, and supporting code of practice, will apply to all tips, gratuities and service charges over which an employer exercises control or significant influence (known as qualifying tips). The employer will be under a duty to ensure that all qualifying tips are allocated fairly to employees and workers (including agency workers). Payment must also be made no later than the end of the month in which the tip was paid (whether by the employer or an independent tronc operator).

The code of practice will include requirements on how employers should distribute qualifying tips fairly and transparently. Employment tribunals will be able to take the code into account when dealing with a claim from an employee.

Failure to comply could therefore result in employment claims and significant liability on the employer. Employees will also be able to bring a stand alone claim for failure to comply with the Act, with the Tribunal having the discretion to order an employer to revise how tips are allocated, order payments to workers (not just the employee bringing the claim) and in addition, award compensation of up to £5,000 for financial loss.

What should you do?

Familiarise yourself with the requirements of the Act to ensure that you are prepared when the Act comes into force next year. We will keep you updated on the progress of the code. A draft is expected to be published at the end of this year. Where tips are paid on more than an occasional basis, employers will be required to have a written policy on how tips will be allocated, so you should ensure any existing policies or new policies reflect the requirements of the code of practice once in force.

If you would like to talk to our expert Employment team, please please call us on 0800 2800 421 or contact us using the form below.

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