A new law on the allocation of tips and accompanying Code of Practice will be in force from 1st October 2024

Starting on 1st October 2024, the Employment (Allocation of Tips) Act will become law. This new legislation will stop businesses in the hospitality sector from unfairly keeping tips and service charges meant for their employees, workers, and agency workers.

The Key Takeaways are below:

• All tips and service charges will be passed to workers (subject to the usual deduction of tax)
• It will now be required that tips be allocated fairly and transparently, an independent Tronc operator could do this this is used to distribute tips and service charges equally, A recommendation would be an electronic app that all employees use.

Businesses that regularly pay qualifying tips and service charges must:

1. Having a written policy detailing how tips are handled. This policy must be accessible to all employees.
2. Maintaining records, this means employers must keep detailed records of all tips paid and how they are allocated to each employee.

Employees have the right to request access to these records at any time.

Risks: Workers can claim with an employment tribunal if the employer does not comply with the rules for allocating or paying qualifying tips. Claims must be filed within 12 months of the breach. The tribunal can order the employer to pay up to ￡5,000 in compensation for any financial loss suffered. If an employer fails to maintain a written policy on tips, workers can also file a claim. The time limit for this type of claim is 3 months.

Recommendation: A strong recommendation from a HR perspective would be to either include a written clause in an employee contract, that specifically addresses the allocation of tips. Another option would be to have a policy written in to an employee handbook. These options would cover any potential legal risks that an employer would face and maintain ongoing compliance with legislation in the U.K

Help: If you require assistance with the above then please reach out to our team of hospitality experts on WhatsApp: https://wa.me/447919919099