Employers operating across the hospitality, leisure and services sectors are being urged to ensure they are not caught short by the change expected this autumn with the introduction of the UK Government’s so-called Tipping Act. New regulations will place a legal duty on businesses to ensure that all tips are allocated fairly among staff - is expected to come into force on 1 October 2024.
A code of practice supporting the measures has been published and is set for Parliamentary approval. As an employment law, it will apply across the UK.
The change could most notably affect staff in the hospitality industry, which employs in the region of 220,000 people across Scotland, including in bars, restaurants and cafes.
The Employment (Allocation of Tips) Act 2023 will not only cover cash tips controlled by employers, but those paid via credit or debit cards as well.
Kate Wyatt, Partner in our Employment Law team, said: “Thousands of businesses across the country will need to be able to show that eligible colleagues receive every penny of tips that they are fairly entitled to.
“While the majority of businesses where tips are given already ensure they are shared among staff, employers would be wise not to overlook the responsibilities this new law places on them.
“Clear processes will need to explain to staff how tips will be allocated and on what basis. Critically, all qualifying tips need to be shared without any deductions.”
The proposed new law states that where the employer receives or exercises control or significant influence over the distribution of tips that they must be “allocated fairly” to workers, including agency staff. They will have to be paid no later than by the end of the month following that in which the tip was paid by the customer. If it is fair to do so, the employer may pay the tips to an independent tronc operator who will allocate them to workers.
As part of the rules, workers will have the right to see an employer’s tipping policy, their tipping records and be able to use the code of practice as evidence at any employment tribunal.
Any businesses found not to be complying could face a penalty of up to £5,000 per employee and an order on how it has or should allocate tips in the future.
Kate added: “Some will undoubtedly see this as another piece of red tape and administration that they could do without. But the price of failing to do this correctly could be high - not only if you find yourself sanctioned for not complying with the legislation, but reputationally as you try to attract staff in what’s already a challenging sector for recruitment.
“Our advice would be to not wait until the last-minute to try and get your procedures in place for dealing with this.”
In publishing its code of practice, the UK Government said that many hospitality workers rely on tips to top up their pay - with the move designed to help ease cost of living pressures.
UK Business and Trade Minister Kevin Hollinkrake said: “Whether you are cutting hair or pulling a pint, this government’s legislation will protect the tips of workers and give consumers confidence that when they leave a tip, it goes to the hard working members of staff.”
It says the changes set to come into force will benefit more than two million workers across the UK.
Tips cannot legally be used to count towards minimum wage pay.
Published on 3 May 2024 and featured on Scottish Licensed Trade News website.
