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New Law Protecting Workers’ Tips
Here Haines Watts Payroll Manager Alison Cox details the key points and highlights why outsourcing your payroll provider could help you save time and money.
A New Law came into force on 1 October 2024, introduced through a Private Members’ Bill; the Employment (Allocation of Tips) Act 2023 and the Statutory Code of Practice on Fair and Transparent Distribution of Tips. It is important that you ensure your business meets these new regulations to avoid penalties and stay compliant.
Understand the Rules
The law makes it mandatory for all tips to be passed on to workers without deductions, and the Statutory Code of Practice provides guidance to employers and workers in tipping industries on the fair and transparent allocation and distribution of tips, gratuities, and service charges. These new measures apply to all sectors in England, Scotland, and Wales. Employment policy is devolved to Northern Ireland.
Most employers were already passing on tips to the staff who earned them; the recent changes are aimed at cracking down on the minority of businesses that may still continue with unacceptable tipping practices. The Department for Business and Trade estimated that these changes will mean around £200 million will be received by workers that would otherwise have been retained by these employers.
It is hoped that the new law will also help to build further trust between customers and businesses, as well as create a level playing field for all businesses through the fair and transparent distribution of tips across the board.
Under the new law, businesses are required to have a fair and transparent process in place to distribute tips honestly among employees. Businesses must ensure they allocate staff tips fairly, keep accurate records of any tips given, and have resolutions in place for dealing with concerns from staff should they question their share of the tip. Employers in the wrong could be made to pay fines or compensation to staff, with workers able to hold bosses fully accountable through employment tribunals.
Tipping - Best Practice
There are four key principles businesses should follow in their tipping practices, as per the GOV.UK statutory code of practice:
1. You should have a written policy that is easily accessible and on public display to your employees at work.
2. You should have a process for dealing with customer requests about how you manage tips and service charges.
3. You should make sure that staff understand your policy and can explain it to customers or know where to direct them for more information.
4. If requested by an employee, you should be able to provide a full breakdown of how you distribute service charges, tips, gratuities, and cover charges, as well as any deductions you make and why.
It is vital to stay informed of any planned employment changes and ensure your business is compliant. If you have any questions or need guidance on adapting to these tipping law changes, our Payroll teams at Haines Watts are here to help. We’re committed to helping you navigate this transition smoothly and maintain fair practices for all your employees.
Further guidance you may find useful:
- Code of Practice: GOV.UK Distributing tips fairly: statutory code of practice
- Non-Statutory Guidance: GOV.UK Distributing tips fairly: non-statutory guidance for employers
- Acas Code of Practice on disciplinary procedures : can be a useful tool for employers and workers.
Keeping up with ever-changing legislation and changes to your team members and their circumstances may become overwhelming at times. If payroll isn’t your thing or you are finding that your payroll provider doesn’t give you the service and support you need, why not look to outsource your payroll to Haines Watts?
