The Employment (Allocation of Tips) Act
From 1st October 2024, millions of workers across the UK will see a boost to their earnings, thanks to the Employment (Allocation of Tips) Act. This new law has been put in place to allow workers to keep 100% of their tips, gratuities and service charges, without employers being able to make deductions.
What Exactly Has Changed?
Before this law came into effect, businesses had the option to withhold tips given via card payments, even though cash tips went straight to the staff. In fact, the UK government estimated that by 2021, 80% of tipping occurred via card. This meant businesses could decide whether to pass those tips to employees or keep a portion for themselves.
The new law no longer allows this practice. Employers must now distribute all tips fairly and transparently to the workers who earned them. This could put an additional £200 million into the pockets of workers.
How Do Employers Allocate Tips?
The new law requires employers to allocate tips fairly among staff. The law encourages employers to consider:
- The customer’s intention when tipping.
- The worker’s role in providing the service.
- Any agreements with employees regarding how to share tips.
Employers don’t need to split tips equally across all staff members but must follow a fair and transparent process. To help guide this, the government has published a statutory Code of Practice that employers must adhere to.
Staff now also have the right to request and view their employer’s tipping policies.
How Does This Affect Employers?
From now on, employers must distribute any qualifying tips (whether received in cash, card or even non-cash items like vouchers) to staff by the end of the month following their receipt. Additionally, businesses that regularly receive tips must keep a record of how they allocate those tips and make the record available to staff for up to three years.
Employers must also create a written tipping policy if they collect tips more than occasionally. The policy must clearly define how employers handle and distribute tips and outline the specific entitlements of workers, making sure staff fully understand their rights.
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