Key Provisions Of The UK’s New Employment (Allocation Of Tips) Act 2023 – Employee Rights/ Labour Relations

The Employment (Allocation of Tips) Bill received Royal Assent
in May, becoming the Employment (Allocation of Tips) Act 2023 (the
“Act“), and is expected to come into
force in May 2024. The Act has been introduced after research
suggested that employers in the UK were deducting as much as 10%
from tips given to their workers. The Act creates a legal
obligation for employers to allocate tips, gratuities, and service
charges fairly between workers.

What are the key provisions?

• The Act applies to qualifying tips,
  gratuities, and service charges (together “tips”).
  Qualifying tips include those that are received by the employer
  directly, or that are subject to employer control.




• Allocate the total amount: The obligation to
  share tips fairly will apply to the total amount of tips received.
  Tips must be shared between workers at that particular venue, and
  not distributed across the business. The payments to the worker
  will be subject to deductions for tax and national insurance
  contributions.




• Pay within one month: Tips will need to be
  allocated and paid to workers no later than the end of the month
  following the month in which the tips were paid.




• Have a written policy: Where tips are paid on
  more than an occasional or exceptional basis, employers will need
  to have a written policy detailing whether tips are encouraged in
  the workplace and how tips are allocated.




• Maintain records: Again, where tips are paid
  on more than an occasional or exceptional basis, employers will
  need to retain records of the tips that were paid by customers and
  how they were allocated. Records must be kept for three years.
  Workers will have the right to make written requests for records
  maintained by the employer.




• Right to complain to the employment tribunal:
  Workers will have the right to bring a claim in the employment
  tribunal if the employer has not complied with the Act when
  allocating tips or has failed to comply with its obligations to
  have a written policy or maintain records. Compensation payments
  for failure to correctly allocate tips will be capped at
  £5,000.

What are the next steps for employers?

The Act is not set to come into force until May 2024. In the
meantime, the government is launching a consultation to develop a
code of practice which will contain guidance for employers on the
allocation of tips. Although there is nothing to do yet, employers
should start considering their current practices relating to the
allocation of tips to prepare for the more stringent regulation
that is soon to come.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.