The Employment (Allocation of Tips) Act 2023 ("the Act") received Royal Assent on Tuesday 2 May. According to the government press release, the relevant measures should come into force in May 2024, following a consultation and secondary legislation. The Act will make it unlawful for employers to withhold tips from their workers. The government estimates that £200 million a year in tips is currently being deducted by employers. Once the Act comes into force, this money will benefit the 2 million workers working in hospitality, leisure and services sectors across the UK.
Here is a summary of the new legal rights and obligations the Act will create:
Fair allocation of qualifying tips
The Act provides that employers must 'fairly' allocate 'qualifying tips' among workers no later than a month after the tips are received. 'Fairly' is not defined by the Act, however the government plans to produce a statutory Code of Practice with advice on how tips should be distributed. 'Qualifying tips' includes tips that are received by the workers that are subject to the employer's control, as well as tips that are received by the employer.
Written policy where tips are not occasional or exceptional
Where qualifying tips are paid to an employer's business on more than an occasional or exceptional basis, the Act requires that such employers have a written policy which stipulates how tips are dealt with. The policy must be made available to all workers within the business and should set out whether the employer requires or encourages customers to pay tips. It must also state how the employer allocates tips between workers. If an employer considers that they only receives tips on an occasional or exceptional basis then they do not need to have a written policy, but they must advise their employees of this fact and give them reasons as to why this is the case.
Record keeping
The Act provides that employers whose businesses receive tips on more than an occasional or exceptional basis must keep a record of the amount of tips the business receives and how such tips are allocated among the workers. These records must be kept for a minimum of 3 years, beginning with the date on which the tip was paid. The Act also creates a right for workers to request an employer's tips records for the period when the worker has worked at the business. Workers can exercise this right every three months.
Consequences of non-compliance
If employers do not comply with their obligation to fairly allocate tips within a month of the tips being received, workers will have 12 months from the date of non-compliance to raise an employment tribunal claim. If an employer does not comply with their obligations to have written policies and keep records under the Act, workers have 3 months to bring an employment tribunal claim. If the tribunal finds that the claims are well founded, it must make a declaration to that effect and may order the employer to pay the complainant up to £5,000 to compensate them for any financial loss attributable to the matter complained of.
In respect of claims regarding allocation of tips, the tribunal may also make an order requiring the employer to make payment to their workers in addition to compensation. Under this provision, payment can be made to the worker who brought the complaint as well as other workers who have been affected by the employer's non-compliance with the Act. The tribunal can also make orders requiring the employer to revise a tip allocation or make a recommendation regarding a tip allocation.
Comment
The new obligations on employers that will be introduced upon the Act's commencement are broadly expressed, and will therefore apply to the majority of employers in the hospitality, leisure and services sectors. With the expectation that this Act will come into force in May 2024, employers in these sectors should review their policies and practices now to ensure they are compliant with the Act by the time it comes into force.
Authored by Iona Hamilton.
If you need any advice with regard to this new legislation please do not hesitate to get in touch.
