New Law to Ensure Fair Distribution of Tips for Hospitality Workers
The UK government is introducing new legislation this year to protect the rights of hospitality workers and ensure they receive the tips they earn. The Employment (Allocation of Tips) Act 2023, also known as the Tipping Act, will make it illegal for employers to withhold tips from their staff.
Under the new law, all tips and service charges must go directly to the workers, without any deductions by the employer. The government estimates that this will allow more than two million workers to keep a total of £200 million a year in tips.
The issue of unfair distribution of tips was first raised in 2016 after media reports highlighted malpractice in the industry. While cash tips are already protected by law, the new legislation will cover card payments as well, reflecting the increasing trend towards a cashless society.
The law is set to come into effect on 1 October 2024 in England, Scotland, and Wales, after being delayed from its initial July implementation date.
Key provisions of the legislation include:
- Employers must pass on tips to workers without any deductions.
- A draft statutory code of practice outlines how tips should be distributed fairly and transparently.
- Employers should have a written policy on tips and record how they manage them.
- Workers will have the right to request information about their employer’s tipping record.
- Tips will not count towards earning the national minimum wage.
- Tips must be paid within one calendar month.
- Employers must keep a record of all tips, which workers can request to see.
The legislation will primarily apply to hospitality businesses such as restaurants, bars, and cafes, but will also affect any business that accepts tips, including hairdressers. Tips must be allocated fairly among all workers, including those on zero-hour contracts.
Employers will need to consider factors such as differences in roles, individual or team performance, length of service, and customer intention when dividing tips. Failure to comply with the new rules could result in compensation and fines imposed by an employment tribunal.
While the new legislation may impact cash flow for some businesses that have previously used tips to boost revenue, it is expected to lead to higher employee satisfaction and retention rates in the long run.