New law on tipping to come into force

A new bill making it illegal for employers to withhold tips from staff, and addressing the fair distribution of tips in the hospitality industry, has received Royal Assent.

The new law is expected to benefit up to 2 million UK workers, and is likely to come into force in 2024. As an employer, you will need to ensure your business is compliant - or risk a fine.

100% of qualifying tips and service charges to go to staff

Under the "Employment (Allocation of Tips) Act 2023" employers will now be required to pass on the entirety of qualifying tips received to their employees. These include employer-received tips (e.g. those paid as part of the bill) and monies given directly to staff by customers.

Employers will not be permitted to make any deductions from tips such as credit card fees or money to cover breakages during a shift.

The tips must be distributed fairly amongst all workers. This includes staff in both non-public-facing and public-facing roles, along with agency staff and people on zero-hours contracts. The tips will need to be paid to employees by the end of the month following the month in which they were received.

The new measures will be accompanied by a statutory code of practice which will provide employers with guidance on how to implement the legislation.

Employers will need a written tips policy and to keep accurate records

Employers will be required to put in place a written policy, which details how they collect and distribute tips. This needs to be available for all staff to consult.

Employers will also need to keep records of all tips received and document how they have been shared out. It’s crucial that the records are up to date and accurate as they could be used as evidence at an employment tribunal if an employee feels they have been treated unfairly.

Get prepared!

The new law is likely to come into effect from 2024, so it’s important to plan ahead now. It’s a good idea to start writing your tips policy and think about how the new rules will be communicated to staff and customers. In addition, you will need to consider the financial and time implications of the new law: businesses will non longer be able to use tips to boost revenue and pay card fees, which could result in cash flow issues for some, and collecting and processing the tips will result in extra admin.

Full details of the new law can be found on the government’s website.