• Employment (Allocation of Tips) Act 2023

    On 2 May 2023 the Employment (Allocation of Tips) Act 2023 received Royal Assent. This amends the Employment Rights Act 1996. It is not expected to come into force until 2024. It is estimated that this will mean that over 2 million workers will have their tips protected and over £200 million will go back into the hands of workers.

    The Act provides for the total amount of tips actually paid by customers to be “fairly” allocated to workers; and once allocated, actually paid.

    The categories of payments covered by the Act are “tips, gratuities and service charges.”

    Payments will qualify for distribution under the Act if they are received by:

    1. the employer (“employer-received tips”); or
    2. the worker (“worker-received tips”)

    provided they are subject to the employer’s exercise of control or significant influence over the allocation of the tip.

    Employers must ensure that the total amount in tips paid by customers at, or otherwise attributable to, their place of business is allocated fairly between workers at that place of business.

    The Act also makes a distinction between a “public place of business” (where interaction of customers and workers of the employer is wholly or mainly face-to-face) and a “non-public place of business”. Employers with a non-public place of business will be required to fairly allocate those tips between workers at both the non-public and public place of business should they have one or more public places of business.

    Additional provision is included in the legislation to allow the employer to make arrangements for an independent tronc operator to allocate part or all of the tips, provided the arrangements are fair.

    In order to comply with the new legislation, the employer must, amongst other things, reasonably consider the independent tronc operator to be operating, or intending to operate, arrangements independently of the employer.

    Agency workers who are not otherwise workers of the employer are to be treated as if they were and, in those cases, payment may instead be made to the agent, who must in turn pay the agency worker within the timescale applicable to workers.

    Payment of allocated tips must be made no later than the end of the month following the month in which the tip was paid by the customer.

    Fairness is not defined in the legislation, however, the Secretary of State is due to issue a code of practice on the allocation of qualifying tips to promote fairness and transparency in their distribution which will supplement the . Employers will need to have regard to the code when allocating and paying tips. The draft code for consultation is awaited, which employers can use to their decision on how best to tailor their policies to fit the logistics of their business.

    Employers will need to keep records of how tips have been dealt with and workers will have a right to request more information about their employer’s tipping record.

    Employers will also be required to have a written policy on dealing with tips and workers will be able to bring tribunal claims if their employer hasn’t dealt with tips correctly. The limitation period to bring such claims is 12 (importantly not 3) months to bring such tribunal claims.

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