Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023 will now be launching in October this year.

Although delayed from its original launch date in July 2024, the new Act aims to provide greater regulations around how employers should manage their worker’s tips.

The Act makes it mandatory for employers to ensure that all tips, gratuities and/or service charges are fairly allocated to workers and that any such payments should be made by the end of the month following the month from which the tip was made.

Under the Act, workers cannot be contracted out of their rights under the new Act.

And where a Company pays tips more than occasionally, they are required to have a tipping policy in place and they must have records for how their tips are dealt with.

Employers must also have a request process for workers who wish to receive a copy of their tipping record.

The Act also specifies that any deductions from tips, aside from those required by law (e.g., tax and NI deductions) are prohibited, irrespective of any contractual agreements made otherwise.

Where such a deduction is made, employees can claim unlawful deductions from wages.

The Act will introduce a statutory scheme that allows workers to raise complaints with the Employment Tribunal if their employer has breached the new Act.

The employee must claim within 12 months of the breach, and they could be eligible to receive up to £5,000 in compensation for any financial losses evidenced.

A new Statutory Code of Practice for distributing tips has also been published.

The Code of Practice gives employers further details on how to meet their obligations and can also be used as evidence for employees intending to bring an unlawful deduction claim.

Employers are advised to look at their current approach to tips and gratuities for workers, and what requirements and procedures need to be implemented prior to the introduction of the new Act.