New laws governing the payments of tips to staff are set to come into force on 1 July 2024, a bit later than we expected.
The Employment (Allocation of Tips) Act 2023, which received Royal Assent on 2 May 2023, is designed to make the practice of tipping in the hospitality sector fair and transparent.
The Act will create a legal obligation on employers to allocate all tips, gratuities and service charges to workers and ensure that the distribution is done fairly. The key measures being introduced are:
· It will be unlawful for businesses to refuse to pass on tips to workers.
· Tips must be allocated and paid to the worker (or the agency of an agency worker) by the end of the month following the month in which the tip was paid by the customer.
· If tips are received on more than an occasional and exceptional basis at a place of business, the employer will need a tipping policy and will need to keep tipping records, which workers can access.
· The legislation applies to all workers, including permanent employees, agency staff, casual workers, and those on zero-hours contracts.
To help employers understand the changes the government has issued a draft statutory code of practice. It states that employers should use a clear and objective set of factors to determine the allocation and distribution of tips. The choice of factors should be fair and reasonable given the circumstances and the nature of the individual businesses.
Factors to be considered by employers when setting up their tipping policy include:
• Type of role or work.
• Basic pay.
• Individual and/or team performance.
• Seniority or level of responsibility.
• Length of time served with the employer.
• Customer intention, although it’s not clear at this stage what that means.
UK Hospitality CEO Kate Nicholls said: “The code of practice has been much anticipated and it’s positive that it has finally been published so that the sector can provide feedback and begin to plan. We’re pleased that the code of practice recognises the variety of different business models within hospitality and that the code of practice is not too prescriptive, allowing tips to be based on the circumstances of a role, for example.
“We’ll be working closely with the Department of Business and Trade to provide feedback from members and ensure the final date of implementation allows businesses ample time to digest and implement the requirement under the code of practice.”
“We’ll be working closely with the Department of Business and Trade to provide feedback from members and ensure the final date of implementation allows businesses ample time to digest and implement the requirement under the code of practice.”
Kate Nicholls, UK Hospitality CEO
