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Tips for Tipping: The Employment (Allocation of Tips) Act 2023

March 22, 2024

I used to love pouring the perfect pint of Guinness.

I started off, working as a barman in the village pub in Fife and, over time, moved to work in an Irish bar in Brussels.

Would you believe that most nights, I made more money in tips, than I made in wages? Having said that, I never really trusted how the tips were divided amongst the bar staff. It seemed to me that, whoever was last on shift and locked up, divided out the tips to bar staff.

New legislation

Earlier this month, the Government approved new legislation and a draft statutory Code of Practice regarding how employers should allocate tips. The Employment (Allocation of Tips) Act 2023 is expected to come into force on 1 July 2023.

The new law concerns “Employer-received tips” which are tips paid by a customer and subsequently distributed to workers. (The new law does not concern “Employee-received tips” which are tips over which the employer has no control, for example, cash tips paid by customers directly to bar staff)

What’s new?

It will be unlawful for employers to withhold tips from workers. The new law also states that all tips should be allocated fairly and all workers (including those on zero-hour contracts and agency workers) are protected by this legislation. Aside from assessing who is covered by this legislation, that is straightforward enough.

The draft Code does not require employers to distribute the same proportion of tips to all workers. But where an employer chooses to allocate tips in different proportions, it should use a clear set of factors to justify the allocation. These factors might include job title, level of responsibility, length of service and customer intention. This is where the Code becomes slightly tricky…

How does this affect you?

An employer must have a written policy on how it deals with tips. Additionally, records must be maintained for a three-year period beginning on the date on which the tip was paid.

A worker can make one written request in any three-month period for information about an employer’s tipping record. And, if a request is made, the employer must comply with this request within four weeks from the date of the request.

An employer must also ensure that tips are paid to workers, no later than the end of the month, following the month in which the customer has paid the tips. (So, a tip made in March must be paid by the end of April).

A worker can complain to an employment tribunal in respect of, not only an employer’s failure to have a written policy and/or to maintain records, but also a failure to fairly allocate tips. But the big news is that, if a complaint is successful, the tribunal may order the employer to pay the worker compensation of up to £5,000.

What are my tips for the fair allocation of tips?

Beware! There will be no transition period and this means that, in order to comply with the legislation on 1 July 2024, you need to taking steps now to review your practices. Please don’t wait until the end of June to draft your written policy and consult with your staff.

Be aware… Consider that the time limit for bringing a claim is 12 months from the date of the alleged failure to comply with the obligations (longer than the unlawful deduction of wages 3-month time limit). Give some thought towards which categories of workers can make written requests and include them in your discussions. Look at your current record keeping process and ensure that you adapt this to recording tips.

Be fair. Care should be taken to avoid unintentional discrimination if employers pay their workers different proportions of tips. Could any of the factors you take into account result in indirect discrimination?

As for me, I can console myself with the fact that, despite the fact that this legislation is 25+ years too late for my career, I can still pour the perfect pint of Guinness. Sláinte.

If you have any questions on this on any other area of Employment law, please get in touch with Blackadders Employment Team, working in Aberdeen, Dundee, Edinburgh, Glasgow and across Scotland.

The opinions expressed in this site are of the author(s) only and do not necessarily represent the opinions of Blackadders LLP.

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