Tomorrow (1 October), rules on the fair distribution of tips, gratuities, and service charges among workers will come into effect in England, Scotland, and Wales.
The Employment Act 2023 amends Employment Rights Act 1996, by adding new sections that create a legal obligation for employers to distribute tips to employees without deductions.
The Department for Business and Trade released additional guidance for employers on Friday. This included clarification that tips can’t be combined across multiple branches or sites and a reminder that businesses must consider agency workers when distributing tips.
Tessa Rodgerson is a senior associate with Knights Law Firm. She said that relevant businesses must now have a tipping policy, workers will be able to request copies of their tipping records and legalisation allows workers to file claims at an employment tribunal, if they feel they are not getting the tips to which they are entitled.
Employers may be required to pay compensation up to PS5,000 to compensate for financial losses suffered by a worker and possibly make payments to others. It could mean that a large sum of money is paid to the workers affected in a restaurant or pub.
After publishing a new code of practice for the fair and transparent distribution and payment of gratuities, service charges, and tips in July, the government announced that it would take “further steps” to address tipping. (This could be in the Employment Rights Bill, which will be presented in Parliament next Monday).
When tips are given more often than “occasionally”, as they are in hairdressers and restaurants, employers must have a written policy on tipping. This document has to be available to their entire staff, whether they are directly employed by the employer or through an agency.
The additional guidance from last week confirmed that it is the employer’s responsibility to decide – and justify – which roles are eligible for tip allocation. All those involved in direct customer service should be included.
This document includes a simple tipping policy model, a letter model for workers to ask for their tipping records, and a tipping record template for employers to respond to these requests.
Rodgerson said that the legalisation would also end controversial practices such as the deduction of ‘administrative fee’ or using tipping to augment managerial salaries.
Flexibility of employers in tip allocation
She said: “The code of conduct by the government gives employers flexibility in deciding how they will allocate and split tip amounts, so long as fairness remains.” Employers do not have to give the same amount of tips to each worker, as long as they are able to justify their decisions.
Rodgerson suggests employers consult their workers to ensure that the proposed split of tips is fair and consider how they will allocate them.
She said that employers may be required by law or contract to consult collectively if, for instance, the new tipping practice will require widespread changes in terms and conditions.
It’s important to think about whether employers would like to hire an independent tronc operator who will manage and distribute tips on their behalf. However, it is important to note that employers are still responsible for the fairness of and transparency in any tipping scheme outsourced.
Employers may want to consider assigning a person within the company to deal with requests from workers for tip records.
Tips for Agency Workers
The government stated that tips can be distributed through the regular payroll cycle or by separate tip payments made through the employment agency or directly to workers.
The guidance states that “this does not mean that agency employees should always receive an equally (or any other) share of tips,” as what is fair depends on the particular circumstances of the employer and industry. It is not intended to disadvantage agency workers solely because they are employed through an agency.
Employers who think they can get away with not paying workers their tips and docking their wages need to reconsider. Unite will take every step to make sure our members receive tip and pay justice. – Sharon Graham Unite
Eilidh, a Burges Salmon associate, stated: “Many unions in the UK have welcomed the implementation of the Employment (Allocation of Tips) Act 2023, including Unite. Unite has launched the Fair Pay Fair Tips campaign, as part of which they plan to ‘name-and-shame rogue employers’ who try to ignore the new legislation or distort it.
The Act exposes employers to new claims that can be brought in an employment tribunal. Workers, and agency workers included, can make a complaint at the tribunal if their employer or agent has violated the statutory obligations of the new Act. If found in violation of the new Act, an employer may be liable for a substantial sum of compensation of up to PS5,000 per worker. The Act expands the potential for claims of unlawful deductions of wages, since it includes tips in the definition.
Unite’s general secretary Sharon Graham stated in July: “Unite will not leave any stone unturned to support our members who face exploitation by their employers.
If employers still think that they can get away with not paying workers their tips, or docking pay, they should think again. Unite will take every step to ensure that our members receive pay and tip justice.
Information or tips not being distributed
A complaint filed with an employment tribunal based on the failure to adhere to the rules governing how and when tips should be distributed must typically be made within 12 months from the date of the last failure to comply.
The 12-month time limit does not include any time spent consulting Acas in order to reach a conciliation agreement. This is longer than the normal time limit to bring a claim to an employment tribunal.
If the tribunal determines that a complaint has merit, it may order an employer to revise or make a recommendation non-binding on a prior allocation or pay a worker. Other workers may also be included in this.
The complaint must be made within three months if it is due to the failure of a written tipping record and policy.
The tribunal may also award the worker compensation up to a maximum of 5,000 francs to compensate them for their financial loss.
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