Published on August 16th, 2024.
New Rules on Tipping
Are you prepared?
Starting October 1, 2024, the Employment (Allocation of Tips) Act 2023 will bring significant changes to tipping practices in the UK, affecting over 2 million workers in the hospitality industry.
What’s Changing?
Full Tip Distribution: Employers will be legally required to pass on the full amount of tips, whether paid by cash or card, to their employees. Deductions for bank charges or administrative fees will no longer be allowed.
Fair Allocation: The new law mandates fair and transparent distribution of tips. Although the Act doesn’t specify what ‘fair allocation’ means, a draft Code of Practice has been provided by the Government to guide businesses.
Written Policy Required: Businesses must create and maintain a written policy outlining how tips are distributed. This policy should be clear and accessible to all employees.
Record-Keeping: Employers need to keep detailed records of how tips are allocated. Employees will have the right to request this information once every three months, and employers must provide it within four weeks.
Implications for Employers
Policy Implementation: If you run a hotel, bar, or restaurant where tips are common, you must draft a written policy on tip allocation and distribution. This will help ensure compliance with the new law and reduce the risk of employee complaints or claims.
Timely Payment: Tips must be distributed to employees by the end of the month following the month in which they were received. Failure to do so can result in compensation claims of up to £5,000 per employee.
No Transition Period: There is no grace period for compliance. Ensure your business practices and policies are updated before the new legislation takes effect.
This overhaul aims to improve fairness and transparency in tipping, benefiting workers across the hospitality sector.
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