Tipping Point

On 2 May 2023 the Employment (Allocation of Tips) Act 2023, which makes it unlawful for businesses to withhold tips from their workers, received Royal Assent. The measures are expected to come into force in 2024, following a consultation and secondary legislation (including a new statutory Code of Practice).

Many leisure and hospitality workers rely on tips to top up their pay but are often left powerless if their employer doesn’t pass on to them the service charges received from customers.

Key protections for workers 

The aim of the new legislation is to ensure that tips, gratuities and service charges paid by customers are distributed fairly and transparently to workers (including agency workers).

The Act makes it unlawful for businesses to hold back service charges from their employees, ensuring staff receive the tips they have earned no later than the end of the month following the month in which the tips were paid by the customers.

Employers will be required to have a written policy in place setting out how they deal with tips, gratuities and service charges.

Workers will also be entitled to request information relating to their employers' tipping records which employers will have to respond to within the specified response period, thus enabling workers to access vital evidence should they want to bring a claim in the employment tribunal.

The Act gives workers a new right to pursue a claim in the employment tribunal if their employer does not comply with the new rules about how tips must be dealt with and when tips must be paid.

Impact

It is estimated that the overhaul of the tipping practices will benefit more than 2 million UK workers across the hospitality, leisure and services sectors, who will take home an estimated £200 million more of their cash.

The measures will help to ease the cost of living crisis and boost wages for employees in these sectors, who are often on lower paid jobs. It is therefore no wonder that organisations such as UK Hospitality fully support the new piece of legislation.

Employers need to familiarise themselves with the new legal requirements and adopt clear written policies on their tipping practices and ensure that their record-keeping systems are fit for purpose to record the required information, in preparation for the new rules coming into force.