Allocation of Tips Act 2023 | Key Changes

As the Allocation of Tips Act 2023 comes into force on 1^st October 2024 it’s essential for employers and employees in the hospitality and service sectors to understand the implications of this new legislation. This act is aimed at ensuring fair distribution of tips among workers and introduces specific obligations for employers regarding tips and gratuities. Here’s what you need to know.

The law bans businesses from keeping customers tips and states that 100% of these must be given to staff. In 2021, the Government said that 80% of customer tips were given by card, making it easier for the businesses to keep the money rather than passing it to staff.

Who does this new law affect?

The law effects all businesses in England, Wales and Scotland who collect tips and service charges. This includes tips received by cash or card. Employers must give the tips to the workers by the end of the following month, from when they were received. The Department for Business and Trade has predicted that this new law will mean workers receive £200m more.

One of the significant inclusions in the Act is the treatment of agency workers. Employers must account for agency workers when distributing tips. The fairness of tip distribution will depend on individual industry circumstances, however agency workers should not be put at a disadvantage due to their employment status.

Employers may need to collectively consult with employees, this would depend on the contractual circumstances.

Multiple sites of operation:

Employers must distribute tips specifically at the business location where they are received. This means that tips from different branches cannot be pooled together, ensuring that workers at each site receive a fair share proportional to the tips generated in their respective locations.

Defining scope: who receives tips?

Under the new regulation, all workers who directly provide services to customers must be considered in the tip distribution process. It is now the employer’s responsibility to determine which roles are included in this definition and to justify these decisions in their tipping policy.

Tipping Policy/Records

To aid in compliance, employers should establish clear tipping policies and maintain records of tips distributed. Failure to do so could lead to complaints in the Employment Tribunal.

Dispute Resolution Process

When disputes arise regarding tip distribution, the first step should be internal resolution efforts. If these fail, assistance is available from ACAS (the Advisory, Conciliation and Arbitration Service), which provides impartial advice and dispute resolution services.

Bringing a claim to employment tribunals

Should internal resolution efforts prove ineffective, individuals can bring their complaints to an employment tribunal. The timeframes for lodging complaints differ based on the nature of the complaint:

Failure to Comply with Distribution Requirements:
- Complaints must be presented within 12 months of the failure to comply.
Failure to Comply with Written Policy and Records:
- Complaints must be presented within 3 months of the failure to comply.

It’s important to note that if the complaint was not reasonably practicable to present in the specified timeframe, the tribunal may still consider it. Additionally, time spent consulting Acas for conciliation does not count toward these limits.

Potential tribunal outcomes

If an employment tribunal finds the complaint is substantiated, it may:

Declare the complaint’s legitimacy.
Order the employer to revise previous allocations.
Make recommendations regarding tip allocation.
Compensate affected workers with potential compensation up to £5,000 per worker for financial losses incurred.

The Act also widens the scope for potential claims for unlawful deduction of wages claims, as it incorporates tips in the definition of wages.

How can Taylor Bracewell’s Employment team help?

The Allocation of Tips Act 2023 introduces significant changes that require employers to be proactive in ensuring compliance. By clearly defining tipping policies, considering all workers, and establishing effective dispute resolution processes, employers will not only adhere to the law but also foster a fair working environment. For legal advice or assistance with compliance, do not hesitate to reach out to our employment team. You can call us on 01302 341414 or fill out our online enquiry form.

The information provided is for general informational purposes only and should not be construed as legal advice. While we strive to keep the content accurate and up to date, laws and regulations are constantly changing, and the information may not reflect the most current legal developments. You should consult with a qualified legal professional for advice regarding your particular situation