The government has released draft guidance regarding the forthcoming Employment (Allocation of Tips) Act 2023, which will come into force on the 1st of July, 2024. The act will apply to England, Scotland, and Wales, and is intended to ensure that tips, gratuities, and service charges are distributed equitably to employees.
A consultation has been launched on the draft code of practice, and individuals and hospitality businesses have until the 22nd of February, 2024, to provide feedback.
We’ve summarised the key points for you here:
- The bill’s purpose is to promote the “fair and transparent distribution” of “qualifying tips,” which are defined as those for which the employer has control over how they are distributed to workers.
- If an employee receives and retains a cash tip with no involvement or control from the employer, they are not covered by the code.
- Employers must apply a fairness principle when distributing funds to permanent team members, agency staff, and those working zero-hour contracts. This does not imply that they must distribute the same proportion of tips to all employees. However, the method of distributing tips should be based on a clear set of factors, such as the type of role and customer intention, and avoid any discrimination.
- Employers should consult with staff on the way tips are distributed, and this should be reviewed regularly.
- If a method is supported by employees, it may help an employment tribunal rule that a policy is considered fair and reasonable in the event of any disputes.
- Employers can receive tips directly and pay their share to employees as part of the next payroll cycle, according to the guidance.
- They can also choose to distribute tips using a tronc system, which can be operated by a selected staff member, an external firm, or a staff member elected and agreed upon by workers.
- All tips must be distributed to staff by the end of the month following the month in which they are paid. For example, if a customer leaves a tip on the 23rd of June, it must be distributed by the 31st of July at the latest.
- The bill mandates that employers must have a written policy on how tips are accepted and distributed, as well as how they guarantee that funds are being handled equitably.
- To be considered fair, all employees, including agency workers, must be informed of their entitlement to tips.
- While businesses may share their written policy with customers or display it, it is not required by law.
- Any changes to the policy must be communicated to all staff.
- The act will require businesses to maintain written records of all tips received and how they are distributed for three years, beginning from the date the tip was paid.
- Individual employees will have the right to request, in writing, once every three months, to see their employer’s tipping record dating back up to three years.
- The act will allow employees and agency workers to file complaints about tips with an employment tribunal, which may result in compensation.
To access the draft in full click here. Take part in the consultation here.
