New legislation means employers will no longer be able to keep tips given to staff by customers. It will be unlawful for employers to withhold tips from staff in England, Scotland and Wales when the Employment (Allocation of Tips) Act 2023 (the ‘Tipping Act’) comes into effect on 1 October 2024. It is estimated that the Act will cover over 2 million workers and protect approximately £200 million of tips a year in the hospitality, leisure and services sectors. Under the Act, if an Employment Tribunal finds that an employer has not fairly allocated tips, they may be ordered to pay affected employees compensation of up to £5,000. There will be no transition period after 1 October 2024, so employers must make any necessary changes beforehand to ensure compliance.
The Tipping Act protects all tips, gratuities and service charges, regardless of whether they are paid by card or in cash, before any deductions such as bank and administration charges are made. All workers entitled to tips are covered, including those employed on zero-hour contracts, and the Act makes clear that these tips should be distributed fairly and transparently as recognition of hard work and good service.
The Tipping Act will also require employers to maintain and make available written policies on how tips are dealt with and to keep accessible records of all tips paid and their allocation and distribution.
