This month, The Employment (Allocation of Tips) Bill gained Royal Assent. Designed to ensure employers distribute tips and gratuities fairly and without deductions, The Tipping Act (as it’s informally known) will come into force in 2024. But will it have a positive effect?
We’ve all been there. Whether it was a student bar job or a permanent position with the restaurant chain, hotel group or nightclub, we’ve all had the employer who takes the cost of breakages out of your wages. Or who pays tips at the end of the year. Or worse still, who ensures you never see the tips at all.
Fortunately, such practices are about to become unlawful because, thanks to the new Tipping Act, things are set to change.
What is the Employment (Allocation of Tips) Act?
The purpose of the new law is to create a legal obligation on employers across all sectors to allocate tips, gratuities and service charges fairly and without deductions.
“Without deductions” is designed to eliminate deductions for processing fees. It may also help cover the sort of instances noted above, where an employer takes the cost of a broken glass, smashed plate or non-paying customer out of employee wages. Once the Act is in force, 100% of tips should go to workers. The government estimates this could put around £200 million a year back into the pockets of staff primarily in the hospitality and leisure sectors.
“Fairly” is a little less well defined as yet, although we are going to get a code of practice that will help employers ensure the structures they set up are fair. Legally speaking, it seems that a range of options could be seen as being fair. Dividing all tips among a restaurant’s staff (front and back of house) will be fair, as will letting individual servers keep the tips paid to them. It won’t, however, be fair for tips gained in one restaurant to be shared among workers at a different restaurant under the same ownership.
What’s crucial is that employers clearly set out how tips are distributed within their business in a written tips policy so everybody knows how the land lies. They’ll also need to keep three years records of who gets what and ensure that tips are paid at the end of the month after the tips were received. This will have two obvious effects: i) payroll providers can expect the Act to impact them and they should prepare for a growing role in end of month payroll for hospitality business; and ii) gone are the days of saving up tips for the end of year ‘do’.
Employees who feel their employers are acting unfairly will be able to take the issue to a tribunal, with up to £5,000 consequential losses payable by employers who lose the case.
Is the Tipping Act a good thing?
It’s hard to argue that the new Act doesn’t at least have its heart in the right place.
Speaking as the Bill received Royal Assent, Business and Trade Minister Kevin Hollinrake said: “As people face rising living costs, it is not right for employers to withhold tips from their hard-working employees.
“Whether you are pulling pints or delivering a pizza, this new law will ensure that staff receive a fair day’s pay for a fair day’s work – and it means customers can be confident their money is going to those who deserve it.”
Speaking to People Management, however, Bryan Simpson, spokesperson for Unite Hospitality, took a less optimistic view. “Like all statutory rights, from the Health and Safety at Work Act to national minimum wage, just because it’s the law, doesn’t mean that every employer adheres to it,” he said. “The notion that they will have to pursue a hostile employer for a year to get what they’re owed is of no use to workers whatsoever.”
Putting your payroll in order
In any event, all businesses where tipping is a part of day-to-day business will need to have measures in place for when the Act comes into force in 2024. To ensure your payroll is set up to meet the requirement to pay tips on time, talk to us