Tips and gratuities – hospitality prepares for new legislation

The new Employment (Allocation of Tips) Act will make it unlawful for employers to withhold tips and service charges from staff.  There is no immediate date scheduled for implementation, although we expect that it will come into force in 2024.

It is known that the act will cover ‘qualifying tips’ which are tips, gratuities and service charges. The monetary values must be divided fairly between all employees and be paid by the end of the following month, without any deductions, except for tax and national insurance. Informal cash tipping going directly to the worker will generally fall outside the scope of the legislation.

When the legislation does come in, businesses must have a written policy stipulating how they deal with tips and this should be made available to workers. In a move designed to improve transparency, there is also a new record-keeping requirement: employers must keep a written record of tips and service charges received over a three-year period.

A breach of the rules may result in an employment tribunal claim and the tribunal will have the power to revise the allocation of tips, issue a recommendation and require an employer to make a payment to the claimant. Compensation may be awarded to the claimant up to a limit of £5,000. Unusually, there will be a 12-month period in which an employee can bring a claim if they consider that the employer is in breach of the act.

121 HR Solutions will keep you abreast of when this legislation is introduced and will be able to assist in developing a policy.  To discuss further, contact us on 0800 9995 121.