On 2 May 2023 the Employment (Allocation of Tips) Bill received Royal Assent. This Act will legally oblige employers to fairly allocate tips that they exercise control or a significant influence over. They will also have one month to pay these tips to their staff, beginning on the date that the payment was received from the customer. It will be unlawful for employers to withhold tips from their staff.
Currently, tips paid in cash and tips paid by card have different legal standings. If a waiter directly receives a cash tip from a happy customer, the money becomes their property. That is not the case with tips paid by card- these remain the property of the restaurant and they do not need to pass them on. This Act will change this.
Employers who regularly have to deal with tips must, by virtue of this Act, have a written policy which clearly sets out how tips are dealt with, and whether the employer requires or encourages customers to pay tips.
A statutory Code of Practice will also be issued. This will explain how to fairly and transparently allocate tips. Before the Code is published there will be a formal consultation held on its contents. The Government has stated that this will be available later this year. If employers do not follow this Code employees will be able to raise this in front of the Employment Tribunal.
Additionally, employers will now be obliged to keep records of the allocation of tips. These records must be retained for 3 years, and employees will be permitted to request this information. Workers will have one year to make a tribunal claim regarding the failure to comply with these new obligations.
The idea of this legislation has been floated since 2018. Now it has received Royal Assent it will come into force at some point next year ( the government has yet to announce the actual date).
The government has estimated that workers will receive an extra £200 million worth of tips as a result of these new rules. Two million, mostly hospitality, workers will benefit from this legislation across the UK. The workers in this sector are often on low pay and rely on tips to supplement and top up their income.
For employers impacted by this legislation it is imperative that tips policies are put into place, and enforced, in advance of the legislation being in force next year.
If you have any questions on any of the issues raised in the above article, please contact Natalia Milne.