On 1 October 2024, the Employment (Allocation of Tips) Act 2023 (the Act) will come into force, alongside a new Code of Practice regarding tipping.
The Act creates new obligations for employers and new entitlements for workers regarding how tips, gratuities and charges must be dealt with.
The key provisions require employers to pass on tips to workers in full, and to allocate tips in a fair and transparent manner.
Tips must be distributed within one month following the month in which they were received.
Where a business receives tips more than occasionally, employers should have a tipping policy in place.
Employers are also required to maintain a running record of how every tip has been dealt with for three years from the date a tip was paid.
Workers also have a right to request a copy of their tipping record, and if they believe they have not received their full entitlement of sums from tips they have a right to bring a claim to the employment tribunal.
The Act will hopefully help to clamp down on exploitative practices in the service industry, where tips intended to be paid to workers are kept by employers or not fairly distributed.
The Act requires employers to be transparent and fair in the distribution of their tips, to distribute tips in a timely manner and to keep a record of how all tips are dealt with.
An unfortunate unintended consequence of the Act may be that some businesses enforce a no tipping policy, to avoid the headache of record keeping and the risk of falling foul of the new law.
The Act also introduces a new right for workers to bring employment tribunal litigation when they have not been paid the tips they are entitled to. This will enable workers to hold employers to account for unlawful conduct in relation to the distribution of tips. Legal costs for employment tribunal litigation can be expensive. In reality, the legal cost of bringing a standalone claim for unpaid tips may quickly outweigh the value of the unpaid tips being claimed for.
This may therefore be a standalone claim that workers commonly pursue without legal representation to avoid costs. Alternatively, claims for unpaid tips may be parcelled in with other claims so that the value of the potential compensation justifies the legal costs of litigation. Time will tell.
This blog was written by Yavnik Ganguly, Solicitor at didlaw.
