Significant new obligations for employers who handle staff tips

On 25 July 2024, the Employment (Allocation of Tips) Act 2023 (Commencement No. 2) Regulations 2024 were made, bringing into force the main provisions of The Employment (Allocation of Tips) Act 2023 (the “Act”).

This means that from 1 October 2024, there will be substantial changes to the law around how employers handle tips. There is an accompanying Code of Practice which will also come into force on 1 October 2024, and non statutory guidance is expected in due course.

In summary, this means that from 1 October 2024, employers who handle tips will have new obligations to distribute tips to workers fully, fairly, and transparently. In addition, employers whose workers receive tips on more than an occasional and exceptional basis are required to have a clear and fair written policy (that is compatible with the accompanying statutory Code of Practice) and to maintain a record of how tips were distributed for three years following receipt. If non-compliance is alleged, employees will have 12 months to bring a claim to the Employment Tribunal: a significantly longer window than the three months allowed for most other legal claims. Please see here for further information about the changes.

Looking ahead, the now governing Labour Party previously expressed a desire to “strengthen the law to ensure hospitality workers receive their tips in full and workers decide how tips are allocated” as part of their “Plan to Make Work Pay” in the run up to the 2024 General Election. It is not yet clear whether the Act, which was originally introduced under the previous Conservative government, will satisfy Labour’s ambition in this area, or whether further worker-friendly legal changes to tipping practices will materialise.

In the meantime, with only two months to go, employers need to prepare for these changes, including introducing a written policy and consulting their workforce regarding the policy.

Please get in touch with a member of our employment team if you would like assistance.

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