The government has said it will introduce “further measures” on tipping, as it published a new statutory code of practice on the fair and transparent distribution of tips, gratuities and service charges under the Employment (Allocation of Tips) Act 2023.
The law, which comes into force on 1 October 2024, requires employers to pass on tips in full to staff, allocating them in a fair and transparent way.
Where tips are left more than “occasionally”, such as in restaurants and hairdressers, employers are required to have a written tipping policy, which has to be made available to all staff, regardless of whether they are employed or engaged by them directly or hired through an agency.
Tips must be distributed within one month, following the month they were received and workers have the right to request a copy of their tipping record to enable them to make a claim at the employment tribunal if they believe they are not receiving the tips they are entitled to.
Justin Madders, the new minister for employment rights, said: “Britain’s outdated employment laws require an urgent update. This government will ensure they are fit for the modern economy and deliver on our plan to Make Work Pay. We will be introducing further measures on tipping to ensure workers get their fair share of tips.”
Tipping code of practice
The “Tipping Act”, which applies to England, Scotland and Wales and was originally scheduled to become law on 1 July, also requires employers to maintain a record of how every tip has been dealt with for three years after the tip was paid.
The code of practice does not set out an exhaustive list of factors for employers to consider but provides “overarching principles” on what fairness is for the purposes of the Tipping Act, the areas in which employers need to make decisions to comply with their duties, and how they should apply these principles in their business.
In the case of agency workers, any references to “employer” in the code refer to the hirer for this engagement in the place of business they are working, even where their contract of employment is with an employment agency.
After a business has made the payment of tips to an employment agency, the agency is responsible for passing this on to agency workers, without unauthorised deductions.
Employers should consult with workers to seek broad agreement in the workplace that the system of allocation of tips is fair, reasonable and clear. Consulting properly with affected workers, says the tipping code, can ensure any concerns and issues are understood by employers, and minimise the risk of discrimination.
Employers must also consider whether there may be legal or contractual requirements to engage in formal collective consultation where a tipping system affects terms and conditions around pay that are covered by a collective agreement with a recognised trade union.
The code acknowledges that employers may vary greatly in their business practices. If a particular method of distributing tips is considered fair by workers, that may help an employment tribunal conclude it to be considered fair and reasonable.
“Staff support and agreement with a method of distribution needs to be genuine and not coerced by managers or employers,” states the tipping code of practice.
It adds that an employer can also choose to allocate and distribute tips fairly and transparently by using a tronc, a fund into which tips are paid for distribution to the staff.
Various tronc arrangements are permitted. An employer may directly appoint a member of staff to be responsible for allocating and distributing tips, and that member of staff can act as an independent tronc operator. A tronc operator may also be an external payroll or accountancy firm or a member of staff elected or agreed upon by the workers. “Care is needed to maintain independence,” states the code.
Employers may share their written tipping policy with customers or make it public if they wish, but this is not a requirement of the Tipping Act.
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