The Department for Business and Trade has issued a new Code of Practice on Fair and Transparent Distribution of Tips (the “Code”). The Employment (Allocation of Tips) Act 2023 (“Tipping Act”), which will take effect on 1 October 2024, stipulates that customer gratuities and service charges must be given directly to workers without deductions, and the employee can enforce such rights through the Employment Tribunal. The Tipping Act will guarantee that companies develop and implement a recorded tipping policy that prioritises fairness and transparency and is accessible to all employees. Businesses must take the Code into account when drafting such a policy and distributing tips.
According to Section 27C of the Tipping Act, qualifying tips, gratuities, and service charges are defined as tips received by the employer directly, or those that are paid by the customer to a worker, subject to the employer’s control. The Tipping Act and the Code apply to all workers in England, Wales, and Scotland, apart from self-employed individuals.
As well as money itself, a “qualifying tip” may also take the form of a “voucher, stamp, token”, etc, provided it has a fixed value and can be exchanged for money, goods, or services.
The goal of the Tipping Act is to increase worker fairness through the adoption of a tipping system that allows individual workers to be directly compensated for their hard work and good service. Although this Code does not give a comprehensive list of considerations to employers, it does provide an expansive understanding of what fairness means in connection to the Tipping Act, which will help employers make judgements and deal with issues related to qualifying tips.
The Code emphasises fairness and transparency and requires employers to use objective logic and explicit rules to determine a fair tip allocation. Certain parameters, such as the type of role, basic wage, and amount of responsibility are considered. Individual companies must determine how to implement such a policy. To guarantee transparency, all employees are required to have access to policies and rules that impact them, either electronically or physically, and that employers provide a clear tipping record.
To fulfil the purpose of the Tipping Act, there is an emphasis on the need of having fair systems in place to handle workplace concerns related to accepting tips. Employers should observe the ACAS code of practice for disciplinary and grievance proceedings. In the case of an unresolved disagreement, the Employment Tribunal ultimately decides whether the employer behaved in accordance with the law. The judge must give due consideration to the Code when determining disputes.
We are told that helpful guidance will be issued to help businesses ensure they are compliant with the Tipping Act in practice.
We advise you to familiarise themselves with the new Tipping Act and the Code in advance of the 1 October 2024 implementation date to ensure tipping practices do not fall foul of the legislation.
