The Answer
No – under new legislation expected to come into effect in October 2024, employers will be legally obliged to ensure that ALL customer tips and gratuities – whether paid in cash, debit, or credit card, are passed on and distributed to staff without deductions. As such, it will be unlawful to make any deduction for bank or administrative charges incurred.
Tips and/or gratuities must be paid in full no later than the end of the month in which they were paid by the customer. The new law will apply to all employees - including agency and zero-hours staff. Employees will also gain rights to request information about tips and their distribution. To help support this, a Statutory Code of Practice will be introduced before the end of the year. This will set out how tips should be distributed in order to achieve fairness and transparency.
The Risk/Threat
Employers face claims in an Employment Tribunal (ET) if they fail to meet the new requirements, ultimately leading to compensation and fines. Employers may also face cash flow problems due to them previously using tips/gratuities to boost business revenue.
What You Need To Do
Employers must be prepared to implement these changes immediately to ensure they remain compliant when the changes come into effect. Payroll systems and internal policies must be modified to meet the new requirements. Employers also need to prepare for how they publicise these new tipping practices, and how they communicate them to their staff and customers.
This article is intended as a brief overview for guidance purposes only. Employers requiring any further assistance with this issue are strongly advised to call the HR Helpline Service for FREE on 01455 852 028.
