On tipping practices.
I've recently returned to working in hospitality whilst looking for grad jobs. This has got me reflecting on the new tipping legislation coming into force this year.
The new Employment (Allocation of Tips) Act 2023 was originally supposed to come into effect in July, but will now be delayed until October. The government said this was due to 'extenuating circumstances', and noted that workplaces should have more time to prepare.
What does the Act mean?
The Act is essentially a new legal code of practice for tipping, meaning that all tips received by employers should be distributed to staff fairly. This includes non-cash tips, e.g., those made by card, and even those received in a voucher form, for example, casino chips which can be traded for a cash equivalent.
The main principles of the Act are:
The Act requires employers to create and maintain a written policy for tips and how they're distributed. This should be a streamlined process to deal with customer requests on how to manage tips and service charges. The policy should be made accessible to all workers, which they can request to see at any time.
The Act requires employers to maintain a record of all tips paid and their allocation/distribution between each worker. Again, workers should be able to access this.
Businesses should ensure that tips are paid to employees no later than the end of the month, following the month in which the customer paid the tips.
If it's proven that employees aren't receiving tips, they can now take their employer to a tribunal. This request can be made once every three months and if tips are not paid on time - a member of staff can potentially claim up to £5,000 compensation at tribunal, in what is perhaps the biggest change to current practices.
Legal experts have already made guidelines for employers on how best to enact the new legislation. Solicitor Ellis Jones advises that "Staff should receive a full breakdown showing how service charges, tips, gratuities, cover charges and deductions are distributed and why they are distributed in a certain way."
The Act lays out some exceptions, however.
If a worker receives and keeps a cash tip, this isn't covered by the law. Digital tips which go directly to employees are also not covered by the law. In theory, this should mean that all employees who directly receive their tips will get to keep them - but will that be the case?
The Act does not cover self-employed people. Many industries where workers traditionally receive tips are self-employed - think taxi drivers, fast-food delivery workers, those in the hair and beauty industry, etc. This becomes even more complicated for agency workers, whose employment status can vary.
Further, the Act only covers businesses which receive tips 'regularly'. It states, "...unless they receive tips only occasionally and exceptionally. For example, a clothing shop which only receives tips from customers a few times a year would not need to have a written tipping policy."
Clearly, there are a few exceptions here meaning that many workers who receive tips will not actually be covered by the law at all. Personally, I'm most interested in how the new law will affect agency staff and precarious workers. I fear this legislation is essentially just a way for cash tips to be declared and made taxable, affecting those already in low-paid jobs who may depend on that income. With employers now being legally bound to create a tipping policy, will it end cash-in-hand tips?
I'm also majorly concerned about how the new Act will be enforced.
Who is going to ensure that workplaces are actually complying with the legislation?
The Act does state that ACAS can fill in as a mediator for any disputes, but: "It is recommended that all parties attempt to resolve issues between themselves in the first instance. However, failure to fully observe the Code does not in itself amount to proof that an employer has been acting unfairly."
To me, this reads that employers are responsible for policing themselves - which is already the case! Notably, at the time of writing, ACAS' website hasn't been updated with guidance on the new tipping legislation - no doubt as they're waiting on the government's further guidance themselves.
Ultimately, whilst the new Act is a step forward in ensuring fairer practices in the hospitality industry - it remains to be seen as to whether the implementation of the law will be carried out faithfully.
Are you affected by the new legislation? Have thoughts on the above?
Send comments anonymously here.
Resources:
Draft Code of Practice on the new tipping law
ACAS response to the consultation on tipping (Published February 2024)
Ellis Jones Solicitor - Advice for employers on enacting the legislation



















