Effective from 1 October 2024, a new law under the Employment (Allocation of Tips) Act 2023 will transform how tips are distributed in various industries across England and Wales and will impact the hospitality, leisure and service sectors predominantly. Previously, some business owners were able to withhold tips, using them to reinvest in their business, which although not illegal, deprived employees of their full earnings. Under the new legislation, this practice is now prohibited. The new legislation mandates that all tips, gratuities, and service charges be paid in full to the workers who earned them, ensuring fair and transparent tip distribution.
Who does the new law affect?
The new law applies to businesses in sectors where tipping is a common practice, such as hotels, restaurants, hairdressers, and similar service industries. The statutory code of practice accompanying this law aims to ensure that employees across these industries receive their rightful share of tips. The only group excluded from these provisions are self-employed individuals.
What are the key points from the code of practice regarding tipping practices?
The new code of practice outlines several critical elements for businesses to follow:
- Written tips policy: businesses must develop a clearly documented tipping policy that outlines how tips are distributed among staff, unless tips are received only occasionally or exceptionally. This policy should be accessible to all employees and optionally displayed to the public. Employers must ensure that staff are well-informed about the business’s tipping policy.
- Fair allocation of tips and right to information: employers should have a clear framework for distributing tips to their workers. Employee’s now have the right to make a written request to view an employer’s tipping records, of how service charges, tips, gratuities, and cover charges are distributed. Employers must share this information in a way that complies with data protection laws.
What do you need to do?
To comply with the new law, businesses should take the following actions:
Create a written tipping policy and keep accurate records of how tips are distributed: develop and document a clear policy on how tips are allocated and distributed and what steps the employer takes to make sure tips are handled fairly and transparently. Ensure this policy is communicated to all staff members and displayed publicly in the workplace. The staff have a legal right to their share of tips, and ensure this right is upheld in all tipping practices. Keep detailed records of all tips allocated to staff for at least three years to ensure transparency and compliance.
If you need further information about the new allocation of tips law, feel free to reach out to us by emailing CritchleysHR2@critchleys.co.uk