Legislation has been passed that gives workers the right to be given tips, gratuities, and service charges in full, i.e., with no deductions for processing fees and for tips etc., to be allocated fairly. The Employment (allocation of tips) Bill was given Royal Assent on 2 May 2023 and as expected, it becomes the Employment (Allocation of Tips) Act 2023.
The law won’t come into effect until 2024 as the Government must draft a Code of Practice that must then be consulted on. We expect to see the draft Code of Practice later this year, which will be in place for the purpose of promoting fairness and transparency in the distribution of qualifying tips, gratuities, and service charges. However, what we know already from the content of the Bill that was passed is:
Coverage of the legislation
The legislation would apply to both public and non-public places of business.
A public place of business is defined as where there is interaction between customers of the employer and its workers that is wholly or mainly face to face.
Non-public means that the business is not a public place of business. The payment of tips, gratuities, and service charges to workers in non-public places of business would occur where the employer has one or more public places of business.
The legislation will apply to employees as well as agency workers, and includes the allocation and payment of tips, gratuities and service charges processed through a tronc. It defines an ‘independent tronc operator’ as someone who the employer reasonably considers to be operating or intending to operate independently of the employer.
Qualifying tips, gratuities, and service charges
Under the legislation workers are entitled to receive tips, gratuities, and service charges that they qualify for, and the Code of Practice will set out what defines ‘qualifying tips etc.’.
How tips must be dealt with
The legislation requires employers to ensure that the total number of tips, gratuities and service charges is allocated fairly and paid to all workers.
The legislation refers to the Code of Practice, and therefore means, employers must have regard for it when determining what would be a fair allocation of qualifying tips, gratuities, and service charges.
When tips must be dealt with
The payment of the tip, gratuity or service charge must be paid no later than the end of the month following the month in which the customer paid it.
If qualifying tips, gratuities, or service charges are paid on more than an occasional and exceptional basis, the employer must have a written policy on how it deals with them, which must include certain items and be made available to all employees. Furthermore, amendments to the policy must also be made available to all employees.
Records must also be created of how every qualifying tip, gratuity and service charge is paid. These records must be maintained for a three-year period beginning with the date on which the qualifying tips, gratuity or service charge were paid.
Furthermore, an employee/worker may make one written request in any three month period for records of qualifying tips, gratuities and service charges, which the employer will be required to provide within a reasonable time period, so long as the disclosure does not contravene data protection.
Complaints to an Employment Tribunal
Under the legislation, a worker can complain to an Employment Tribunal and must do so before the end of a three-month period which begins with the date of the alleged failure (although extension of time limits may be allowed in exceptional circumstances). Complaints can be made in respect of:
- An employer failing to comply with the Regulations that require an employer to set out how and when tips etc. must be dealt with
- An agent failing to comply with the requirements to set out when and how to make payments.
- An employer failing to comply with its obligations for having a written policy and maintaining records.
If an Employment Tribunal finds in favour of the worker, it may order the employer or agent to pay an amount, not exceeding £5,000, that is appropriate to compensate for any financial loss. It may also require an employer to comply with the requirement to have a written policy and maintain and provide records.
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