The main provisions of the Employment (Allocation of Tips) Act 2023 and the Code of Practice on Fair and Transparent Distribution of Tips come into force on 1 October 2024.
There have been concerns that some employers make deductions from tips, for example, for “administrative fees,” or retain a proportion of tips. Under the Act, employers must ensure that workers receive “tips, gratuities and service charges” (“tips”) in full and that tips are allocated fairly and transparently.
According to Unite, the trade union for hospitality workers, the Act will impact over four million workers who receive tips. Briefly:
- All tips paid on or after 1 October 2024, over which the employer exercises control or significant influence, must be allocated fairly to workers, including eligible agency workers
- Payment in full (less deductions required by law such as tax and NIC) must be made no later than the end of the month following the month in which the tip was paid
- Employers need to have a written tipping policy and keep records
- An independent tronc operator can allocate tips. A tronc scheme is a special pay arrangement that allows businesses to use for example, an external accountancy firm or payroll business to fairly distribute staff tips, gratuities, and service charges.
- Workers cannot contract out of their rights and can bring Employment Tribunal claims for breach of the Act
- The Act applies in England, Wales and Scotland
The Act only applies to “qualifying tips” which are:
- All employer-received tips and
- Certain worker-received tips
Employer-received tips are paid by the customer, either received by the employer or an associated person. This includes tips made by credit or debit card and paid into the employer’s bank account before being distributed to workers or where the tip is received through a mobile app.
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