Allocation of Tips – New Legislation

Do you receive tips or gratuities, or make a service charge to customers?

On 1^st October 2024 new legislation will come into force regarding the allocation of tips.

It will require organisations to distribute tips, gratuities and service charges to employees and workers.

The purpose of the Employment (Allocation of Tips) Act 2023, which is generally referred to as “the Tipping Act” is to ensure the fair and transparent allocation of all tips, gratuities and service charges. The desired outcome is to improve fairness for workers by ensuring that the tips consumers leave in recognition of good service and hard work are going to the workers as intended.

Organisations must have a written policy setting out how ‘tips’ will be distributed, and while employers have discretion on how to do this, it must be fair, equitable and non-discriminatory.

The policy must be communicated to all employees and workers and made available to them (and any changes communicated).

Businesses will also be required to keep records of how tips are distributed for at least 3 years, and employees will be able to request to see these.

If you are in the hospitality industry or any other industry where this may apply, and you do not have a written policy in place, or a way of recording how tips are allocated, you need to act now!

A template policy and documents will be available from YourHR.guide shortly, together with further guidance, and if you are a member, you will be notified when this is available (although it will only be available to Premium members).   It will include examples of how tips can be distributed fairly, as well as documents and spreadsheets for record keeping.

Alternatively, you can contact Practical HR who can provide a ‘bundle’ of documents including a template policy and associated documents.

Please contact us on 01702 216573 or email [email protected].

For further guidance, you can read the Government code of practices on the fair and transparent distribution of tips.