New tipping law into force on October 1 – what employers need to know

About 7% of UK workers receive tips as part of their work. Many hospitality workers rely on these tips to top up their pay and are often left powerless if businesses don’t pass on service charges from customers to their staff.

To combat this, new legislation, coming into effect this October, will make it mandatory for employers to hand over tips to workers in full, and allocate them in a fair and transparent manner.

The Employment (Allocation of Tips) Act 2023 has its origins in the Good Work Plan, which was unveiled by the UK government in December 2018 as a response to the Taylor Review of Modern Working Practices. The Plan aimed to address various challenges faced by workers, including the unfair allocation of tips in the hospitality sector.

Under the Employment (Allocation of Tips) Act 2023, employers must:

• Pass on 100% of tips, gratuities, and service charges to workers. Employers cannot make any deductions from these tips, except those required by law, such as tax or National Insurance contributions.
• Ensure a fair distribution of tips among workers. This involves establishing and clearly communicating a policy on how tips are allocated, taking into account factors like hours worked, job roles, and the quality of service provided. This policy must be accessible to all employees to promote transparency.
• Keep records of how tips are distributed and provide workers with access to this information upon request. This transparency helps to ensure that the distribution process is fair and compliant with the law.

The Act also provides workers with the right to take disputes regarding tip distribution to an Employment Tribunal if they believe the rules are not being followed.

The legislation is supported by a new statutory Code of Practice that provides detailed guidance on how to implement these requirements effectively.

If you need help with your Allocation of Tips Policy, don’t hesitate to reach out! We’re here to assist you in ensuring that your policy is compliant and effectively communicated to your team.

Millions to take home more cash as Tipping laws come into force – GOV.UK (www.gov.uk)