Fair and Transparent distribution of Tips
The Employment (Allocation of Tips) Act 2023 was granted Royal Assent on 2 May 2023, amending the Employment Rights Act 1996. On 22 April 2024, The Department for Business and Trade published the government’s response to their consultation on a draft statutory code of practice on the fair distribution of tips.
The Employment (Allocation of Tips) Act 2023 and the Code of Practice will come into effect on 1 October 2024, it will be applicable to Great Britain only and will not apply to Northern Ireland.
The act aims to ensure fair and transparent allocation of tips, gratuities, and service charges. Under the act employers are now required to:
• Pass on all tips and service charges to workers without deductions, except in limited circumstances;
• Ensure tips are distributed in a fair and transparent manner;
• Have regard to the above Code of Practice when distributing or influencing the distribution of tips;
• Maintain a written policy on how tips are dealt with, ensuring it is available to all workers; and
• Maintain a record of all tips paid, their allocation and distribution, to which workers have the right to request access.
In summary the code of practice provides guidance on the following:
• The overarching principle of fairness under the Act;
• The employer’s duty to decide on the application of this principle in their place of business; and
• What constitutes a tip including the criteria for non-monetary tips to be considered within the scope of the Act.
The code of practice states that a payment will come within the scope of the act if it is received or controlled or significantly influenced by the employer. This means that any form of tip that the employer has influence over will qualify as a tip, and the tip will only be outside the scope of the Employment (Allocation of Tips) Act 2023, if there is no employer influence.
The Code of Practice provides examples of scenarios in which certain tips will fall outside of the scope of the Act. These include but are not limited to situations in which a worker receives and keeps a cash tip with no employer control or involvement, digital tipping, where a customer uses an app to directly tip members of staff, bypassing the employer altogether.
In readiness for the new changes, those operating in hospitality or any industry involving tips should prepare to have policies in place covering how they will be distributing tips fairly and in line with the Employment (Allocation of Tips) Act.
Credit: REC
