All change for workers in the service industry

If you work in a business in which customer tips play a part, last month will have been significant. On October 1st, the Employment (Allocation of Tips) Act 2023 came into force. This new law makes it mandatory for tips to be passed on to workers, with no deductions. Where the law isn’t complied with, affected workers can enforce their rights through the employment tribunal, although other avenues such as mediation may provide a quicker and less formal route to resolution.

A statutory code of practice is in place to help employers understand their duties. Key points in the Code include:

1. Employers must have regard to the Code when designing and implementing their tipping policies and practices. If a dispute between the employer and a worker reaches the employment tribunal, judges have a duty to take the Code into account (although failing to fully observe it doesn’t necessarily mean the employer acted unfairly).
2. Employers must pass on all tips and service charges to workers without deductions, except in some limited situations - where income tax needs to be deducted, for example.
3. Not all tips count. A ‘qualifying tip’ is one which is received by the employer (eg a payment via a card machine) or which is received by the worker but its distribution is controlled or significantly influenced by the employer (ie the employer tells staff how to distribute cash tips, or collects cash tips and distributes them at the end of a shift or as part of the payroll). A ‘non-monetary tip’, such as a voucher or token, could also be a qualifying tip.
4. Employers must have a written policy on how tips are dealt with and must maintain a record of all tips paid and how they were allocated and distributed between each worker. Workers can request access to this record.
5. Qualifying tips must be distributed in a fair and transparent matter, including to eligible agency workers.
6. Employers don’t necessarily need to allocate the same proportion of tips to all workers. However, employers must consider all workers that provide service to customers.
7. Employers should determine allocation and distribution by using a clear, objective set of factors. Considerations could include: distribution between front-of-house and backroom workers; hours worked when tips were received; seniority; customers’ intentions. Employers must be careful to avoid any form of unlawful discrimination.
8. Employers should consult workers to ensure the system of allocating tips is fair, reasonable and clear. The approach to allocating tips should be reviewed regularly.

There is a lot more detail to consider in the Act and the Code and employers must make sure they are up to speed on their legal duties. If you are unsure about what the law requires in your particular business, or if you need advice about the documents and processes you should have in place, contact our team on 01264 353411 or email us on employment@bsandi.co.uk. Equally, if you are a worker who feels their employer isn’t dealing appropriately with tips, we’re here to help.