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Tipping Act and accompanying guidance now in force

on Friday, 11 October 2024.

The new Employment (Allocation of Tips) Act 2023 (the Tipping Act) came into force on 1 October. It is backed by statutory and non-statutory guidance to help employers ensure that tips are distributed fairly to workers.

Background

The Tipping Act aims to ensure that 'qualifying' tips, gratuities and discretionary service charges are distributed fairly and transparently to workers. Tips, service charges and gratuities must be allocated between workers in full by the end of the month after the month in which the tip was paid. The Tipping Act is accompanied by a statutory Code of Practice which sets out principles for the employer to take into account when considering how to fairly allocate tips. In order to help employers comply with the new law, the government has now also produced non-statutory guidance for employers.

Statutory and non-statutory guidance

The statutory Code of Practice aims to ensure that all workers involved in service provision, including agency workers, receive their fair share of tips. It outlines key principles of fairness, acknowledging that equal distribution is not required but should reflect factors like the worker’s role, hours worked, and performance. Importantly, the Code mandates that employers create and maintain a written tipping policy, which should be accessible to all workers and outline the processes for distributing tips.

In addition to ensuring fairness, the statutory Code also promotes transparency. Employers are required to keep detailed records of all tips received and their distribution for a period of three years. Workers have the right to request access to these records, which will help prevent disputes over tip distribution. Failure to comply with these requirements could result in claims being brought to employment tribunals, where employers risk facing fines and compensation awards. Employers are required to have regard to the statutory Code when designing and implementing their tipping policies and practices.

The purpose of the non-statutory guidance to help employers interpret the Tipping Act. It contains advice on practical issues such as how to fairly allocate tips to agency workers and how to proceed where a business has multiple sites of operation. It includes example scenarios and explains how the Tipping Act applies to these.

Learning points for employers

Employers receiving tips on more than an occasional basis are now legally required to maintain a written policy on tip distribution and keep accurate records of tips received and allocated. These measures are essential to comply with the new law and ensure transparency in the workplace.

The introduction of the Tipping Act marks a significant shift in how tips are handled, with the aim of creating a fairer and more transparent system. Employers should take prompt action to ensure compliance with both the statutory and non-statutory guidance, reducing the risk of disputes and fostering a more equitable working environment.


For more information or advice, please contact Georgia Blesson in our Employment team on 07340 631 557, or complete the form below.

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