Last year, Law at Work reported on how the Employment (Allocation of Tips) Act 2023 had received Royal Assent. This legislation is now set to be introduced in July 2024, and will regulate how employers allocate tips amongst workers (including eligible agency workers) in the hospitality sector. When the Act substantively comes into force, workers will obtain a right to:
- Receive a fair allocation of all "qualifying tips, gratuities or services charges" by no later than the end of the month following the month in which the tip is paid.
- Not be subjected to a dismissal or detriment for asserting statutory rights in relation to tips. No qualifying period of service is required to obtain this right, meaning a casual employee might bring a claim for automatically unfair dismissal.
Where qualifying tips, gratuities and service charges are paid at (or are attributable to) an employer's place of business on "more than an occasional and exceptional basis", employers are also under an obligation to:
- Keep records in relation to how every such tip has been dealt with, backdating three years from the date on which the tip was paid.
- Have a written policy in place on how it deals with tips, which must be readily available to workers.
The legislation covers all employer-received tips and certain worker-received tips, meaning cash payments made directly to workers may be caught, unless the employer has a practice of not exercising control over such tips. It also applies to the actual amount paid by the customer and any deductions, for example credit card fees, should not reduce the amount allocated.
Where an employer has failed to comply with its obligations regarding allocation or payment of qualifying tips, a compensation payment of up to £5,000 may be ordered in respect of each worker. The time limit for bringing a claim (starting from date of non-payment or incorrect allocation) is 12 months.
Although the main provisions of the Act aren’t expected to come into force until 1 July 2024, the government intends to publish a statutory Code of Practice in spring 2024 on how to allocate tips fairly. Whilst non-compliance will not give rise to a cause of action in itself, the Code will be admissible in evidence in employment tribunal proceedings, and employers should therefore be mindful of its provisions.
