The new law makes it unlawful for an employer to withhold tips, gratuities, and service charges (‘tips’) that are paid by its customers and requires employers to allocate tips to their hospitality and leisure workers in a fair and transparent manner.
- This means that millions of UK workers will take home an estimated £200 million more. The Act includes:
- the employer to pay tips to their workers by no later than the end of the month following the month in which the customer paid the tip.
- the employer must have a written policy in place that deals with tips in the workplace which is shared with all workers. This will only apply to businesses that receive regular tips. If a business receives occasional or exceptional tips, the employer must confirm that they are not required to have a written policy in place and explain why.
- keeping a record of how every tip has been dealt with – for 3 years. This needs to include the amount of the tip and the amount that has been allocated to workers (or if an independent tronc operator has been engaged, how the tips have been allocated by them).
- a right that a worker can make a written request for the employer to provide their tips records for a period specified in their request. This right is limited to one request in any three-month period and is subject to several conditions. To be provided within four weeks.
- a right that agency workers benefit from this Act under similar terms as workers.
Enforcement
It is important to comply with the new Act as a worker can pursue a claim in the Employment Tribunal (ET) if their employer has failed to comply with the requirements of having a written policy or the rules around their tip records.
If the ET rules in a worker’s favour, the Tribunal can (1) make a declaration, (2) make an order to comply, (3) order the employer to pay the worker up to £5,000 in compensation;
In addition, there is no recourse for the employer for the overpayment of tips.
What next?
Although the Act has received Royal Assent, it is not yet confirmed when the Act will come into force, but it is expected to be sometime in May 2024. A statutory Code of Practice will support the measures in the Act.
In the meantime, you should review your current contracts, policies and practices on tipping to ensure they are ready to comply with the changes coming into force.
Employers may also consider engaging an independent tronc operator to distribute tips fairly and transparently. An independent tronc operator is automatically considered as ‘fair’, which allows employers to focus on other parts of their business.
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