On 2 May 2023, the Employment (Allocation of Tips) Bill received Royal Assent, which is the final step required for a parliamentary bill to become law. The purpose of the Employment (Allocation of Tips) Act 2023, is to ensure that tips, gratuities and service charges paid by customers are allocated to workers.
The Government estimates that the new legislation will result in 2 million workers across the hospitality, leisure and services sector having their tips protected and consequently £200 million a year will “go back into the pockets of hardworking staff.” The new legislation is widely welcomed by workers across the UK who face ongoing “cost of living” strains.
Under the new legislation, employers must ensure that they fairly allocate between workers, the total amount of “qualifying tips, gratuities and service charges” that are paid at or otherwise attributable to a place of business of the employer.
Any payments that the employer is required to make under the Act must be made no later than the end of the month following the month in which the tip, gratuity or service was paid by the customer.
Additionally, employers will be required to keep a record of how the relevant qualifying tips, gratuities and service charges have been dealt with and maintain the record for a period of three years beginning with the date on which the qualifying tip, gratuity or service charge was paid. A worker will also have the right to make a written request for the employer to provide records within the period specified in their request.
Where employers pay tips on a more than occasional or exceptional basis, they must have a written policy on dealing with qualifying tips, gratuities and service charges for the place of business. Where an employer is required to have a written policy, they must make it available to all workers of the employer at the place of business.
Workers will have the right to bring a claim to an Employment Tribunal if the employer fails to comply with the rules on how and when tips etc must be dealt with under the Act. The Tribunal will have the power to award compensation to workers up to £5,000 for any financial loss as a result of the breach. Workers may also bring a claim before an Employment Tribunal in connection with an employer’s failure to provide a written record of the tips or written policy, as required by the Act.
The measures are set to come into force by way of secondary legislation around a year after Royal Assent and the commencement date will be confirmed by the Government later this year. There will also be a statutory Code of Practice, which employers must have regard to in determining the allocation of qualifying tips, gratuities and service charges.
Conservative MP, Virginia Crosbie has commented that “it was never right that a minority of companies could pocket tips when the public wanted them to go to the person who served them or made their food. The law will now boost wages for what are often lower paid jobs and not boost company profits at the expense of hard-working staff.”
If you are an employer or employee in the hospitality or leisure sector and have a query regarding the new legislation or any other employment law query, then please contact our expert HR and employment law team on 0845 287 0939 or complete our online contact form and a member of the team will get in touch with you.