New Laws on Tipping give employees an extra £200 million
The Employment (Allocation of Tips) Act 2023 received Royal Assent on 2 May 2023 and is expected to come into force in May 2024. It is estimated that the new laws on Tipping will result in workers receiving up to £200 million in tips that would have otherwise been ‘deducted’ from wages.
New legal obligations for employers
The Act creates new legal obligations for employers:
- To fairly allocate tips over which they exercise control or significant influence and pay them to workers in full within a month of the payment being made by the customer.
- Where tips are paid regularly the employer will also be required to have in place a written policy setting out how tips will be dealt with.
- Employers will have to maintain a record of tips received and how they are allocated and retain that record for three years. Employees will also have the right to request access to these records.
The new legislation will apply to employees, workers and agency workers.
The measures in the Act will be supplemented by Statutory Code of Practice which is being developed and will be subject to a formal consultation towards the end of this year.
What Employers need to do
The delay before implementation gives employers time to prepare. To ensure compliance, it is important to begin gathering information about tipping and to plan how you will compile and retain the records required. You should also consider whether you will need to make any payroll changes to accommodate paying tips to workers.
Once the Code of Practice is published, employers will need to put in place a written policy (or amend any existing policy to ensure compliance with the Code) setting out how tips will be dealt with. A failure to comply with this code will be admissible in evidence in any Employment Tribunal claim.
Implications of non-compliance
Workers will have the right to request information about their employer’s tipping policies and a copy of the records held about the tips paid and how they have been allocated. This will assist workers in determining if all of the tips have been properly paid over to them. Where their employer does not pay 100% of the tips to workers or does not hold an accurate record of how tips have been dealt with or does not provide them with appropriate information in relation to the tips paid, the worker will be able to complain to the employment tribunal. In addition, workers can bring claims where there is no written tips policy in place.
The limitation period for workers to bring claims will be 12 months from the relevant failure and not the usual 3 months.
The remedies available to the tribunal will be:
- to compel the employer to revise their tip allocation policy;
- an order to pay tips to any workers (not just the claimant) employed; and
- compensation for financial losses caused by the non-payment of tips of up to £5,000 per claimant.
It is therefore important to review your current tips arrangements and any changes that you will need to make in advance of next year to limit the risk of successful claims and additional costs to your business. As the obligation will be to pay over 100% of the tips received to workers, depending on your banking and payroll arrangements and charges, you may decide to only allow cash tips. If many businesses take that approach the unintended consequence of the legislation which was designed to increase workers take home income may be that we actually see a reduction in tips given post pandemic fewer people tend to carry cash.
If you require advice on the new legislation or would like us to assist you in putting in place a tips policy bespoke to your business or update your existing policy, please contact Claire Treacy on 0161 912 6149 or email@example.com