Legislation to guarantee tips for hospitality workers

Feb 7, 2024

The Employment (Allocation of Tips) Bill is set to come into force on 1 July 2024.  The new legislation will place a legal obligation on employers to ensure that all tips, gratuity, and service charges are paid in full to workers, including eligible agency workers. 

This is expected to have a substantial impact on the income levels of approximately 2 million workers in the UK’s hospitality, leisure, and service sectors.

The Government has recently started consulting on a draft statutory Code of Practice that business are encouraged to follow to ensure compliance with the new legislation. 

What do the new rules require?

Fair and Transparent Allocation: Employers must ensure that they distribute tips, gratuities, and service charges fairly and transparently to their workers without deductions, except in very limited scenarios, such as deduction of income tax. The Code of Practice recommends employers consider various factors, including job roles, individual or team performance, and seniority when allocating tips. Employers should aim to have an objective and reasonable method for distributing tips that takes into account the specific circumstances of the business.

Timely Payment: Employers have a responsibility to pay tips to their workers within one month of the end of the month in which the tips were received.

Written Policy: Employers are required to have a written policy outlining how they allocate qualifying tips. This policy should be accessible to all workers, providing clear guidelines on the criteria and methods used for distributing tips.

Record Keeping: Employers must maintain comprehensive records of all qualifying tips distributed at their place of business. These records should detail the allocation and distribution of tips among workers. Crucially, workers have the right to request access to these records to help promote transparency and allow workers to verify that they’ve received their fair share of tips.

Enforcement: Workers will be able to take enforcement action through the Employment Tribunals in respect of any breaches of the new obligations, with the Tribunals having the power to do the following:

  • Make a public declaration of any failure to comply with the rules;
  • Make an order for the employer to revise previous allocations of tips;
  • Make recommendations on previous allocations of tips; and
  • Order employers to pay compensation to workers.

What’s next?

Consultation on the Code of Practice is due to end on 22 February 2024, following which it’s expected the Government will publish a final Code of Practice. Further non-statutory guidance is also expected soon. 

Employers in the hospitality sector should be assessing their existing procedures for managing tips, gratuities and service charges to ensure they align with the new legislation.  Once published, businesses should review the final Code of Practice and any additional guidance to ensure their compliance.

This continues to be a complex and evolving area of law with a further raft of regulation expected in early 2024. If you need further advice on any points from this article, please contact us to speak to a member of our Employment Team.

 

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

Tom Hyatt

Tom Hyatt

Solicitor, Employment Law

t: 0118 989 8153
e: tom.hyatt@herrington-carmichael.com

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