Alan McCormack | Senior Associate

The Employment (Allocation of Tips) Act 2023: UK workers to take home more pay as withholding tips from staff becomes unlawful.

The Employment (Allocation of Tips) Act 2023 received Royal Assent on 2 May 2023, meaning as estimated £200 million a year will go back into the pockets of 2 million UK workers by retaining tips, gratuities and service charges that would have otherwise been deducted.

The Act centres on ‘fairness’ of tip allocations, and while ‘fairness’ isn’t defined in the Act, it will be within a statutory Code of Practice that ‘stakeholders’ will agree upon. It is expected that a draft Code of Practice will be available later this year, with the Act coming in to force in 2024.

The Act requires hospitality businesses to ‘fairly’ allocate 100% of tips, gratuities and service charges to workers no later than the end of the month following the month in which the customer  paid it. Currently, as the law stands until the Act comes in to force, a tip, gratuity or service charge is the legal property of the hospitality and leisure business and it’s a matter for the business to decide how much, if anything, goes to its workers, and when.

The Act also requires hospitality and leisure businesses to hold a written tipping policy and keep records of all received and ‘fairly’ allocated tips.

Under the Act, a worker can make complaints to an Employment Tribunal in respect of the following:-

  • An employer failing to comply with the Regulations that require an employer to set out how and when tips, gratuities and service charges must be dealt with;
  • An agent failing to comply with the requirements to set out when and how to make payments;
  • An employer failing to comply with its obligations for having a written policy and maintaining records.

Any claim must be made before the end of a three-month period beginning with the date of the alleged failure, although the Tribunal has discretion to extend time limits in exceptional circumstances.

If an Employment Tribunal find in favour of the worker, it may order the employer or agent to pay an amount, not exceeding £5,000, that is appropriate to compensate for any financial loss. It may also require any employer to comply with the requirements to have written policy and maintain and provide records.

If you require advice in relation to The Employment (Allocation of Tips) Act 2023, or any other employment matter, our experienced team are here to help. Please contact us today.

Alan McCormack

Alan McCormack

Employment Law Team

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