New rules for distributing tips
On 1st October 2024, the Employment (Allocation of Tips) Act 2023 will come into effect, introducing significant changes to how tips are managed and distributed in the hospitality industry.
This legislation aims to improve fairness by ensuring that all tips, gratuities, and service charges are allocated fairly among employees. The new rules address longstanding concerns about the retention and distribution of tips by employers, ensuring transparency and fairness.
Summary of the new rules
- Fair Distribution: Employers must distribute all tips, gratuities, and service charges fairly and equitably among workers. This includes both cash and card tips. The distribution must be fair and transparent and aligned to a Code of Practice and can include a tronc arrangement.
- No Deductions: Employers are prohibited from making any deductions from tips, including administrative fees. The only exceptions are those required by law (e.g., tax).
- Transparency: Employers must clearly communicate their tipping policies to employees and customers, ensuring transparency around how tips are handled.
- Record-Keeping: Employers are required to keep detailed records of all tips received and distributed for a period of three years. These records must be made available to employees upon request.
- Written Policy: A written policy outlining the distribution of tips must be in place and accessible to all staff members.
- Service Charges: Any service charges added to bills must be treated as tips and distributed accordingly.
If you’re an employer affected by the rules, now’s the time to consider any changes you may need to make around tracking and managing tips. You must comply with these regulations to avoid potential penalties, but the new rules and increased transparency should also help you ensure a fair working environment for your team.
As is so often the case, if you’re unsure of how best to implement the new regulations in your business, we’d advise speaking to your HR advisor. This is likely to be an inflammatory subject within the Hospitality industry, so definitely not one to be caught out by!
You can find more details here.
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