Update: Allocation of Tips Legislation and Code of Practice to commence on 1 October 2024

The Employment (Allocation of Tips) Act 2023 is coming into effect from 1 October 2024.  There was some confusion over whether – given Labour’s proposals to strengthen the “worker voice” when it came to tip allocation – the legislation would be tweaked before it comes into force.  Emma O’Connor, Legal Director and Head of Client Training, reports.

The new “Tips Act”, and the Regulations which bring the Act into effect, imposes a duty on employers to allocate qualifying tips, service charges and gratuities fairly and transparently to its workers (note the wider category of worker).  The new duty applies to all tips, gratuities and service charges over which an employer exercises control or significant influence. Payments and allocations must be made no later than the end of the month following the month in which the customer paid the tip. The new rules apply to England, Scotland and Wales.

As well as operating a transparent system of allocation, the Act will also require employers to have a written policy on how their tips are managed and ensure that such a policy is available to workers.  This may include some thought around how the policy is communicated to all of an employer’s workers who perhaps do not have access to the employer’s intranet, for example.  Moreover, employers will also be required to maintain a record of all tips collected and also record how tips are distributed between workers.  Workers will have the right to request access to this register.

To accompany the new Act, there is a Code of Practice on Fair and Transparent Distribution of Tips. The new Code is not legally binding in the sense that there are penalties for non-compliance; however, employers are expected to follow its guidance when allocating tips and employment tribunals would be able to have regard to non-compliance as evidence against an employer. 

How can Boyes Turner help?

For help and advice in setting up a policy and process for fairly allocating tips, advice on what are “qualifying tips” and the risks associated with a breach of the new rules, please contact our Employment Team.