New law governing the allocation of tips delayed until October 2024
James Rowland
Co-Founder & Director @ Neathouse Partners (HR, Employment Law & Health and Safety)
The Government has announced that the Employment (Allocation of Tips) Act 2023 will now be implemented from 1st October 2024, and will be pushed back from the previously announced date of 1st July 2024 because of changes that still need to be approved by Parliament.
Commonly referred to as the Tipping Act, The Employment (Allocation of Tips) Act 2023 received royal assent in 2023, and will take effect across England, Scotland and Wales in October this year.
The legislation prohibits employers from retaining or withholding any qualifying tips, such as gratuities, tips made in person with either cash or a card, and voluntary service charges.
The Act also states that correct tax and National Insurance deductions must be applied to tips at their source (i.e. by the employer), and reported to HMRC as part of standard payroll procedures.
100% of tips must be distributed among working staff in a fair way.
The legislation aims to financially protect workers who rely on tips as a major part of their earnings.
Under the new law, as of 1st October 2024, employers must distribute those tips to workers.
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For employers in establishments where tips are commonplace, they must also have a formal tipping policy that is recorded.
Workers are now entitled to request a copy of their tipping record to support potential claims in the Employment Tribunal regarding any tips they believe have been withheld from them.
Employers must also adhere to a new statutory Code of Practice for managing fair tip distribution.
The Government has said it will create non-statutory guidelines and advice for businesses to help them prepare for the new legislation.
“It is not right for employers to withhold tips from their hard-working employees,” says business and trade minister, Kevin Hollinrake. “Whether you are cutting hair or pulling a pint, this government’s legislation will protect the tips of workers and give consumers confidence that when they leave a tip, it goes to the hardworking members of staff.”