Employers – time to get your written policies in TIP-top condition!

What is the Employment (Allocation of Tips) Act 2023

The Act is the first piece of legislation which directly concerns the distribution of tips as between employers and their workers.

The purpose of the Act is to create a legal obligation on employers to allocate all tips, gratuities and service charges which they are paid or which they exercise control or significant influence over (“qualifying tips”) to workers without any deductions. The Act also requires employers to ensure that the distribution of qualifying tips between workers is fair.

The desired outcome of the Act is to improve fairness for workers to not only ensure that the tips they are left by customers after providing excellent service actually go to them as intended, but also to ensure that there is consistency in all employers’ obligations and a clear set of rules is set out for all employers to comply with.

What do employers need to do?

The Act requires employers to have regard to a Code of Practice (“the Code”) as set out within section 9 of The Act when complying with their obligation to allocate tips fairly. The Code sets out the principles of fairness and transparency, reflecting various ways that tips are reasonably collected by employers and received by workers.

In addition to acting in accordance with the Code employers are also required to make available to workers a written policy setting out how tips are dealt with in that place of business. Upon request, employers are also required to share records of the qualifying tips which they have received and the amount of those tips which have been allocated to the requesting worker.

What are the consequences of failing to comply with the Act’s requirements?

Failure to act in accordance with the Act will expose employers to litigation risk as the Act creates remedies to be made available to the Employment Tribunal in cases where employers fail to comply. In addition to the inherent reputational damage a tribunal judgment may attach, available remedies through the Act include allowing tribunals to order the employer to revise the allocation of tips or to order an employer to make a payment to one or more workers.

How can Thackray Williams Help

The impact of the changes that the Act will introduce should not be underestimated by employers across the hospitality sector where tips, gratuities and service charges are paid to their workers. The Act will require employers to have clear policies and act in a way that is in accordance with the Act’s Code of Practice.

An employer’s obligations will depend on the specifics of their business, the frequency that tips are given and the employer’s degree of control.

Thackray Williams has a team of expert employment solicitors who are able to advise employers on the application of the Act to their business – including their requirements for record keeping in accordance with the act as well as the likely exercises they will have to undertake in identifying and tracking their affected workforce.

We are able to draft bespoke written policies that meet employer’s specific commercial requirements whilst complying with these new obligations under the Act’s Code of Practice to minimise employers’ litigation risk.

If you have any questions on how we can assist please do not hesitate to get in touch Julian Munroe or anyone else in our Employment team on 020 8290 0440 .