New Legislation Around Tips Comes Into Force

The new Tips Code of Practice law has come into effect – here’s what it means for you and your business.

Titled the Employment (Allocation of Tips) Act The government have brought into law a new code of practice regarding the distribution of tips in the workplace, to ensure any tips taken are fairly split among workers.

Previously, allocation of tips was at the discretion of managers or policies of individual or chain businesses. However, this new law now dictates how all businesses must distribute tips.

The BBC reports that ‘more than three million workers across restaurants, cafes, pubs, hairdressers and taxis should benefit from legislation which comes into force on Tuesday and means all tips – whether in cash or by card – must be shared between workers.’

A key stipulation behind bringing this new law into force is the widespread shift to digital and card transactions as cash becomes less prominent in society. Paying on a card typically meant it was easier for a business to keep money paid as tips. It is estimated that in 2021, 80% of all tips given were done via card payments.

Furthermore, the Department for Business and Trade estimate that this law will ensure approximately £200m that would have been kept by employers will now reach workers.

In order to enforce this legislation and make sure businesses do comply, if employers fail to meet the requirements of this law, workers will be able to make a claim through an employee tribunal, claiming up to £5,000 in compensation.

As The Caterer states, business operators must now:

• Pay all tips to employees by the end of the month following when they were received.
• Pay the tips to employees at the place of work where the tip was received, rather than sharing them across a group.
• Implement a written policy on allocating tips.
• Include agency workers and those on zero-hours contracts in a share of any tips given during their shifts.