Understanding the New "Allocation of Tips" Law

From 1^st October 2024, new tipping legislation came into force - The Employment (Allocation of Tips) Act 2023. The Act mandates that all qualifying tips (i.e. those which the employer receives or has control or influence over) must be passed on to workers in a fair and transparent manner.

Key Points of the New Allocation of Tips Law

1. Mandatory Tip Distribution: All tips, whether given in cash or via card, must be distributed among all workers. This includes agency staff, casual workers and those on zero-hours contracts.
2. Policies and Record Keeping: Employers must have a written Tipping Policy setting out how tips are dealt with, how they will be allocated, and which workers will have the right to receive them. The Policy must be available to all staff.

Records must be kept for three years detailing all qualifying tips received and the amount allocated to each worker. Workers have the right to request sight of the records at any time.

1. Timely Distribution: Employers are required to pass on the tips to employees at the latest by the end of the month following the month in which the tips were given.
2. Fair Allocation: Tips must be allocated fairly. They do not have to be passed equally to all staff and consideration can be given to role, seniority and customer intention.
3. Impact on Workers: This law is expected to benefit millions of workers across the UK, providing them with additional financial security. For many in the hospitality industry, tips are a crucial part of their earnings.
4. Customer Confidence: The new law also aims to boost customer confidence, ensuring that their gratuities are going directly to the staff who provided the service.
5. Legal Recourse for Employees: If an employer fails to comply, employees have the right to take their case to an Employment Tribunal. The Tribunal can make a declaration of the breach, order the employer to revisit their tip allocation and to make payment to both the worker bringing the claim and others within the organisation who have also been affected.

Why this change matters

The introduction of this new law is a step towards fairer treatment of workers and addresses long-standing issues where tips paid by customers were sometimes retained by employers. Workers will now receive the additional payments and be rewarded for their hard work and customer service.

Employers will need to ensure they have their policies and record-keeping up to date, and put in place appropriate methods of recording and paying tips on a monthly basis.

At Battens Solicitors, we are committed to helping businesses navigate these changes and ensure compliance with new regulations. With a raft of new changes and developments in employment law recently published, if you have any questions or need legal assistance on employment or HR matters, please do not hesitate to contact us by emailing dawn.gallie@battens.co.uk or give the team a call on 0800 652 8373.