The main provisions of the Employment (Allocation of Tips) Act 2023 were laid before Parliament on 31 July. Here’s a quick recap on what this legislation will require of employers when it’s implemented on 1 October.
Currently, cash tips tend to go straight to the staff member they’re given to (subject to there being no contractual provisions to the contrary). However, tips paid by card usually go directly to the employer and are often only partially passed on (currently, deductions of 3-5% remain commonplace). Indeed, they’re sometimes not passed on at all.
Plans to legislate in this area were announced as far back as 2015. It’s been a long time coming, but the post-COVID move away from cash payments (around 80% of tips are now paid by card) and the crippling cost of living crisis eventually forced the Government into action and a private members bill finally received Royal Assent in May last year.
Under the Act, withholding tips from staff will be unlawful and employers will be legally obliged to distribute them fairly amongst staff.
The Act provides for the following:
A requirement for employers to pass on 100% of tips to staff with no deductions, other than those that are legally required (meaning that deductions to offset credit card fees and payroll costs etc. will not be allowed).
A statutory Code of Practice citing the principles of transparency and fairness that employers should work to.
Confirmation that tronc systems (a pool for tips which a tronc master then shares between staff) can continue if they are being run in accordance with the new legislation.
A requirement for tips distributed via a tronc to be paid no later than the end of the month following the month in which they are received.
A requirement for employers to have a written policy that ensures tips are distributed fairly, consistently and transparently.
A requirement for employers to keep a record of how tips have been distributed for 3 years from the date they are received.
A right for workers to request information relating to their employer’s processing / distribution of tips for a specified period of their employment within the last three years.
Agency workers to receive the same protection under the legislation.
Employers that fail to comply with the new legislation will be at risk of employment tribunal claims, which could result in them having to amend tip allocations and / or pay compensation.
Whilst all this should be good news for the 2 million UK hospitality workers, businesses that engage them will no doubt dread incurring additional expense in a sector that is already affected by rising costs.
If you’re an employer who will be affected by these changes, get in touch on 01942 727200 or email enquiries@employeemanagement.co.uk for a no obligation chat to ensure you are fully prepared.