New Tipping Rules in Force: What You Need to Know

Mark Ridley reviews new rules that apply to the distribution of tips.

On 1st October 2024 the Employment (Allocation of Tips) Act 2023, together with the statutory Code of Practice on Fair and Transparent Distribution of Tips came into force.

The Act regulates how employers are to allocate tips amongst workers.

A complete overview of the provisions of the Act and the statutory Code is not possible in this blog. However, the key features are:

• The rules will protect workers and eligible agency workers.
• The rules will cover all tips gratuities and service charges in relation to which the employer exercises control or significant influence.
• The act applies to all tips paid on or after 1st October 2024.
• Employers must make sure that all tips gratuities and service charges are allocated fairly and make payment by the end of the month following the month in which the tip was paid by the customer.
• Employers may appoint an “independent tronc operator” (a pay arrangement used to distribute tips).
• The Code of Practise is statutory and is admissible as evidence. Employment Tribunals will be required to take it into account when determining relevant claims.
• The rules relating to unlawful deductions from wages will apply to qualifying tips gratuities and service charges.
• Workers cannot agree in a contract to exclude their rights under the Act.
• Workers can make a claim to an Employment Tribunal in the event that there has been a failure to comply with the Act. The time limit for claiming is 12 months.
• A Tribunal has the power to change the allocation of tips, order the employer to make a payment to an affected worker and order compensation up to £5,000.
• Employers who pay qualifying tips gratuities or service charges (other than occasionally or exceptionally) must have a written policy explaining how the tips will be dealt with and make it available to all workers.
• There are rules in relation to record keeping.
• A claim can be made to the Employment Tribunal in relation to an employer's failure to have a policy or keep records. Such a claim has to be made within three months and the Tribunal can award compensation of up to £5,000.

On 27th September 2024 the government introduced a non-statutory guide for employers. The guide includes simple templates for a tipping policy and record keeping. Legal advice should be taken as to whether these simple templates are appropriate for your business, if the Act applies to you.

This is not legal advice; it is intended to provide information of general interest about current legal issues.