Allocation of Tips

Confirmation of the commencement regulations for the Employment (Allocation of Tips) Act and its accompanying Statutory Code of Practice is now in place and scheduled to come into force on the 1st of October following the delay from the original July 2024 date.

The long-awaited change to the law will ensure protected rights under the ERA 1996 for those working in the hospitality services and leisure sectors, enabling a system of fairness and transparency in the distribution of tips, gratuities, and service charges that fall within the scope of Part 2B of the 1996 Act (“the Code of Practice on Tips”).

The Tipping Act defines “qualifying tips, gratuities, and service charges” as employer-received tips or as certain worker-received tips. These terms are explained as referring to tips that are themselves either received by the employer subject to the employer’s control, or connected to worker-received tips that are subject to employer control.

The determining factor in whether a tip is qualifying or not is whether the employer receives or exercises control or significant influence over (in the case of worker-received tips) the distribution of tips. Typically, this is applicable when employers first receive the money and then allocate it to workers.

The code of practice sets out certain principles on the ‘conduct’ of fairness and transparency and how employers should apply these principles in the workplace, other clauses included in the Act will require employers to:

• Maintain a written policy on how tips are dealt with at their place of business, and ensure this policy is made available to all their workers.
• Maintain a record of all tips paid at their place of business and their allocation and distribution between each worker, and to which workers have the right to request access.

Tips must be distributed within one month following the month in which they were received, and employers are required to maintain records demonstrating how every tip has been dealt with for a period of three years from the date the tip was paid.

Further details of the Statutory Instrument can be found here: https://www.legislation.gov.uk/ukpga/2023/13