Question: I manage a busy restaurant where we rely heavily on tips as a significant part of our staff’s income. I’ve heard about new laws coming into effect regarding how tips should be handled and distributed. Can you explain what these changes mean for me as an employer, and what steps I need to take to ensure compliance?
Dear Concerned Manager,
Thank you for reaching out about the upcoming changes regarding the handling of tips within the workplace. With the Employment (Allocation of Tips) Act 2023 coming into force on 1st October 2024, it’s perfectly understandable that you’d want to ensure you’re prepared and compliant.
The new legislation is designed to create a fairer system for the distribution of tips, gratuities, and service charges. A key part of it involves transparency. Employers are now required to have clear written policies on tipping arrangements. This means you’ll need to keep records of how tips are allocated and distributed among staff, with an added responsibility to make records accessible if an employee requests to see their tipping history.
An important point to note is that employers are now prohibited from making any deductions from tips, such as admin charges or processing fees. All tips that pass through your business should go directly to your staff – without skimming anything off the top.
Now, if a customer directly tips an employee, say through cash or even a digital app, this is outside the scope of the new law. The Act only applies to tips the employer handles, so in those instances where the employer has no involvement, there’s no need to worry about additional compliance.
There’s also a little nuance regarding non-monetary tips – if your staff receive tokens, stamps, or vouchers, these could fall under the new legislation, but only if they meet certain conditions. For example, tokens used at a casino where your employee works would count, but – if a customer simply offers a barman a drink, this wouldn’t be covered by the Act.
Another big change is that you must now allocate tips fairly – but don’t worry, this doesn’t mean everyone must get an equal share. As an employer, you have the right to distribute tips as you see fit, provided the system you use is fair, transparent, and non-discriminatory. It’s essential to have clear justification for why different staff might receive different portions of tips. Including this in your written policy will not only protect you but also avoid legal disputes down the line.
One option you have is to appoint a tronc operator – someone who handles the allocation of tips among your staff. This could be a team members selected by your employees or an external party – such as an accountant. Whoever you choose, it’s important the process is seen as neutral and transparent. Tips must also be distributed by the end of the month following the one in which they were given. So, if a customer leaves a tip in October, it needs distributing by the end of November.
If employers fail to meet these obligations, employees have a right to take the issue to tribunal. From 1st October 2024, they’ll have up to twelve months to bring a claim, and – if successful, the employer could face hefty compensation claims of up to £5,000 per worker.
If you’re feeling unsure or want more clarity on these changes, don’t hesitate to get in touch with the Chamber HR and Legal Advice Line for FREE on 01455 852 028. We’re here to help ensure you’re fully compliant and updated on current legislation. For additional support and information, you can also book a complimentary, no-obligation One2One Business Review with a Business Support Manager for personalised guidance – all at no additional cost through your membership.
Best of luck,
