In May 2023, the Employment (Allocation of Tips) Act 2023 received Royal Ascent, making it unlawful for employers in the hospitality industry to withhold tips from their employees. This legislation is seen as a positive step forward for workers’ rights and will help to ensure that employees always receive the tips they were given, rather than having them redirected to the business instead.
Who Does the New Law Apply To?
This new legislation is applicable to any employer that owns a business that receives tips on a regular basis, meaning that all hospitality businesses, no matter the size, will be covered by the change in law.
There are a number of things that affected business owners will need to do the be compliant with the new law, including:
- Having a written policy on tipping that is available to workers. The policy should set out how tips will be distributed.
- Paying tips to workers within a month of payment by the customer.
- Keeping records for three years showing how tips have been dealt with.
- Responding to workers’ requests for information about their employer’s tipping record.
- Ensuring that tips are distributed fairly. This could be done by using a tronc system or by another fair and transparent method.
In addition to the new legislation, there will also be a new Code of Practice designed to support employers and employees to navigate the new rules, helping everyone to be legally compliant.
Getting the Changes Right
There has been a lot of concern around the new legislation, especially as it puts pressure on business owners to undertake more paperwork and creating a fair system for the distribution of tips to employees. While the Government has said that they recognise the impact this may have, the need to protect workers and ensuring that they are paid fairly is more important.
As there is still much work to be done to prepare for the new law, it will not come into force until at least May 2024. This will give businesses plenty of time to get to grips with the new ways of working and ensure that everyone is well informed about the changes that are due to take place.
When you consider the changes that will be required, the benefits are certain to outweigh the negatives as the majority of UK employers are keen to get things right for their teams. In those instances where an employer is actively withholding tips from their team, it is good to see that there will be legal recourse in place to protect workers and a clear, statutory Code of Practice to guide everyone through the changes as they take place.
If you are an employer that is worried about the additional levels of bureaucracy, the tax implications or the rollout of the new legislation then you will be able to have your say in the consultation process for the new Code of Practice, so keep your eye on our updates for information about when it is taking place.
For more information or assistance, you can contact Carter Bond Solicitors at 020 3476 6751 or via email at info@carterbond.co.uk. You can also find valuable resources on their YouTube channel and website at www.carterbond.co.uk.
This note comprises the view of the author at the time of writing. This note is not a substitute for legal advice. Information may be incorrect or out of date and may not constitute a definitive or complete statement of the law or the legal market in any area. This note is not intended to constitute advice in any specific situation. You should take legal advice in specific situations. All implied warranties and conditions are excluded, to the maximum extent permitted by law.
