As of October 1, new tipping laws have come into effect, requiring businesses to pass 100% of tips and service charges directly to employees.
The Employment (Allocation of Tips) Act, along with the statutory Code of Practice, has introduced several changes aimed at making tipping practices more transparent and consistent across hospitality businesses.
The Department for Business and Trade estimates that these changes will result in approximately £200 million, which would have previously been retained by employers, now being passed on to employees.
If an employer does not comply with the law, workers will have the right to file a claim through an employment tribunal and seek compensation of up to £5,000.
Operators are now required to:
Disburse all tips to employees by the end of the month following their receipt.
Distribute tips to employees at the workplace where they were earned, rather than allocating them across a group.
Establish a written policy regarding the allocation of tips.
Ensure that agency workers and individuals on zero-hour contracts receive a share of any tips earned during their shifts.
Minister for employment rights Justin Madders said: “When you tip someone for good service, you expect them to keep all their tip. They did the work – they deserve the reward.
This is just the first step of many in protecting workers and placing them at the heart of our economy. We will be introducing further measures on tipping to ensure workers get their fair share of tips.”
UKHospitality Chief Executive Kate Nicholls stated that the association supports the changes, emphasising that they formalise practices that have been 'commonplace in the sector,' as businesses have been preparing for this legislation for several years.
She added: “New rules naturally come with an administrative burden and businesses will see some additional cost as they work through them in practice. It’s another example of costs being placed on a sector that can least afford it, and we continue to urge the chancellor to bring down hospitality’s cost burden at the Budget, primarily through taking action to avoid the billion pound business rates bombshell set to hit the sector next year when relief ends.”
Andrew Tighe, Director of Strategy and Policy at the BBPA, stated that the new framework will “introduce a level playing field for all businesses, ensuring that those who were not already passing on all tips to their staff will now be required to”.
He said: “A greater a degree of consistency and transparency when dispersing tips will benefit both existing and new staff alike. We would urge all operators to review the guidance and ensure their policies are compliant with the legislation.”