What is the new law?

The Employment (Allocation of Tips) Bill will be in force from 1 October 2024.  From that date, employers will be required to allocate tips to staff in a fair way, in line with a statutory Code of Practice.

The law applies to all tipping sectors, the most common of which include those in the fields of hospitality, leisure and service, such as hotels, pubs, bars, restaurants, casinos, betting shops and hairdressers.

The law will cover employees (including zero-hours employees), casual workers and agency workers, but not self-employed people.

What sort of tips are covered by the legislation?

Tips must be received more than occasionally, so a business which only receives a few tips a year, would not have to distribute these tips.

If the employer has control, or significant influence, over the tips, they must be shared out. For example, tips added on to bills via a card payment.

‘Employee-received tips’, over which the employer has no control, are not covered. Examples of this type of tip are cash handed directly to a worker by a customer, or the direct tipping of an individual staff member via an app.

The method of payment of the tip (for example, cash, card or via an app) is not relevant for these purposes.

Non-monetary tips of a fixed value, such as vouchers, casino chips or tokens, can also be covered, as long as they are controlled by the employer. It is currently unclear exactly how this would work in the case of non-monetary tips which cannot be split up, such as gift vouchers.

What sort of approach would be considered fair?

Employers may consider several different factors, but their reasoning should be clear, objective and non-discriminatory. Examples of factors which may be considered are:

• The role of the individual. For example, front of house staff may receive more tips than backroom workers
• Busyness of different shifts
• How many hours the individual works
• Seniority of role
• Length of service
• The individual’s performance in their role, customer feedback and their ability to meet targets set in reviews.

Employees should take care not to accidently discriminate against certain groups of workers. For example, an employer may initially decide to allocate more tips to employees who work an evening shift than to those who work a day shift, but later realise that more women are unable to work the evening shift due to childcare responsibilities.

Tips will normally be shared between workers who work at the specific place where the tip was paid, as opposed, for example, to being shared between all those who work in any chain restaurant owned by the same employer.

How should employers pay tips to their staff?

Employers can pay tips through the payroll. Alternatively they can allocate a member of staff, or an external person, to act as a tronc operator.

The employer must make sure that staff receive the tips by the end of the calendar month following the calendar month during which the tips are received.

Employers must pay the whole tip and not make any deductions, such as for administrative fees.

Tips are not classed as income for national minimum wage purposes, but they do count as income for other purposes, such as tax, tax credits and universal credit.

How should staff be informed of the tipping policy?

Employers will need to have a clear written policy explaining how tips are allocated. This policy should be available to all staff, but there is no legal requirement to provide it to customers who give tips.

 Ideally, employers would consult with their staff and get their agreement that the tipping policy is fair. Those with a collective agreement in place may also need to undertake a formal consultation process.

What records must employers keep?

Employers must keep a record of all qualifying tips received over the last three years, and how these were allocated to each worker. Employers must comply with data protection rules.

Staff will be able to ask to see these records, but such requests are limited to one request per person, per three month period. Employers will have four weeks to comply.

 What can staff do if they feel that the process is not fair?

They can raise an informal complaint, a formal grievance or bring a claim in an Employment Tribunal. Any Employment Tribunal claims must usually be made within twelve months, and may result in an employer being ordered to pay up to £5,000 to compensate the staff member for financial loss.

If you have any questions, please contact us for advice by emailing enquiries@perspectivehr.co.uk or by phoning 01392 247436.