The Employment (Allocation of Tips) Bill 

The Employment (Allocation of Tips) Bill has received Royal Assent and is expected to come into force in the early summer of 2024. A draft Code of Practice is due to be published by the end of the year and, once accompanying legislation is passed, employers will have to ensure that their workers receive 100% of any tips or services charges (minus any tax or National Insurance contributions). 

The Employment (Allocation of Tips) Act 2023 will impact a huge number of people, particularly those working in the Hospitality and Tourism sector. Tourism and hospitality has been a big employer for many years. Back in June 2019, the Government published an economic report on the sector. At this time, around 8% of the UK workforce was employed in the sector and 86% of these employees worked in a restaurant, pub or hotel.  

Employment (Allocation of Tips) Bill

While Covid hit the sector incredibly hard, Hotel News Resource recently reported that a record 2.6 million people are working in accommodation and food service. During the Spring, the sector was creating 1 in 5 new jobs. If the employees are providing great service and customer care, that’s a lot of tips! 

Employment (Allocation of Tips) Act 2023 

The Act applies to agency staff, employees and workers. As mentioned earlier, no deductions should be made from tips except tax and/or NI. This applies to electronic payments as well as cash tips. Tips will need to be allocated fairly (more on that a little later) and in a transparent way. 

The employer is required to keep written records for 3 years. These should detail how the allocations have been made. And tips must be paid in a timely manner – by the end of the following month.   

The Act covers tips which are added to a customer’s bill. It aims to stop businesses retaining tips paid by card.  

Waiting a table

Cash tips paid by a customer directly to a member of staff generally become the legal property of that worker. Some workers who are paid a cash tip may well add it to the company tip pool, others may not… 

Employers can decide how they record the allocation of tips, there isn’t a specific template to follow. A worker is well within their rights to request information on the allocation of tips, the employer has 4 weeks in which to respond.   

Workers can take action against an employer who fails to comply with the new law. Tribunals will have the power to compel employers to change their allocation policies, pay tips to the Claimant and ANY workers employed by the employer. They may also award up to £5,000 per Claimant.   

Allocating tips 

Allocating tips can be a tricky business. In any company, the quality of staff and the service they provide can vary markedly. Do you allocate an underperforming member of staff the same percentage of the tips ‘pot’ as a company superstar?   

Workers in hospitality and leisure often work shifts. Many are on zero hours contracts. Do you allocate per shift or on the total number of hours worked in the month? Does a restaurant receive higher tips in the evening than at lunchtime? Would the worker prefer tips not to be added to their pay packet as it may jeopardise their ability to claim benefits? Smaller businesses may not enjoy this additional administrative burden. If you need help and advice, get in touch

Employment (Allocation of Tips) Act 2023 – Steps to take

There is plenty of time before the Employment (Allocation of Tips) Act 2023 comes into force. First, look at your written policy on tips. Every UK business that attracts tips on a more than occasional basis should have a policy in place that details how gratuities, services charges and tips are dealt with. It must also encompass how these are allocated to workers at the place of business.  

It may be worthwhile considering a tronc. A tronc is specifically designed to help businesses share tips fairly. An employee who is responsible for distributing the tips, is called a ‘Troncmaster’. This is a highly responsible role and one not to be taken on lightly. 

Employment (Allocation of Tips) Bill – Summary

  • The Act is likely to come into effect in early summer 2024 
  • Companies that receive tips on a more than occasional basis need a written policy in place 
  • 100% of tips (including electronic) must be allocated fairly and in a timely and transparent manner 
  • Employers can determine how they record the allocation of tips 
  • Employers must keep records for 3 years 
  • Workers have a right to request information regarding an employer’s tipping record 
  • Employers have 4 weeks to respond to a worker’s request 
  • Workers have a right of action against employer’s who fail to comply

If you require any further help or guidance, please get in touch.