On 1 October 2024, the Employment (Allocation of Tips) Act 2023 comes into force that will completely overhaul practices over tips, gratuities and service charges (tips).
What You Need To Do
A new code of practice has been introduced that requires employers to have in place at their place of business, written policies and practices on tipping arrangements and to keep records of all tips paid including their allocation and distribution between each worker, extending to the right for a worker to request access to their tipping record. Also, there will be a prohibition on deductions from tips collected by the employer like for employer administration charges.
It must be noted that where a worker receives and keeps a cash tip or digital tipping where a customer uses an app to tip the worker directly, these are outside the provisions of the Tipping Act as the employer has no control or involvement in the tipping process carried out by the customer.
Further, some non-monetary tips paid in the form of vouchers, stamps or tokens that satisfy certain conditions could fall within the provisions such as casino tokens where a worker works at a casino, but nontransferable tips such as a customer offering a barman a drink, will not fall within the Tipping Act provisions.
The fair allocation of tips does not mean that employers need to allocate the same proportion of tips to all workers but must be able to justify legitimate reasons why they decided to allocate different workers different proportions of tips and that the process was not discriminatory in any way.
How tips are allocated must be clear in any written policy, with the option of the employer using a tronc process and thus appointing a member of staff, ideally by agreement of the all the staff, who is responsible for allocating and distributing tips thus that member of staff acts as an independent tronc operator. However, an independent tronc operator could also be an external payroll or accountancy firm.
All tips should be distributed to staff, at the latest, by the end of the month following the month in which the tips are paid by customers, for example if a customer leaves a tip on 22nd October, it must be distributed by 30th November at the latest.
The purpose of the change in law is to ensure that employers operate a fair and transparent procedure on the distribution of tips, with such protection extending to agency workers who receive tips.
The Risk/Threat
Where an employer breaches it’s tipping obligation, a worker from 1st October 2024 can take the matter to the employment tribunal for breach of a statutory obligation and would have up to 12 months from the breach to make such a claim and if successful, the employer (and/or agent) could face a compensation claim up to £5,000 per worker when found in breach of the new obligations.
As tips will be incorporated within the meaning of wages, then there could also be claims for unlawful deduction of wages where the time limit to bring a claim will not start to run until the date of the last failure in the series. If you require any further assistance, please do not hesitate to contact our HR/Legal advice line team at 01455 852 028.
