The remaining provisions of the Employment (Allocation of Tips) Act 2023 (the Act) are set to come into force on 1 October 2024. This Act regulates how employers allocate tips among workers, requiring that workers receive tips, gratuities and services charges in full, and that these tips are allocated in a fair and transparent way.
This Act will be accompanied by a statutory Code of Practice on Fair and Transparent Distribution of Tips (the Code) which provides guidance to employers and workers on ensuring the allocation and distribution of tips meet these fair and transparent requirements. Following consultation at the beginning of the year (discussed in our previous insight, linked here), a new version of this Code was published on 29 July 2024. This new draft includes few material changes to the original, but some of the key changes include clarification on the definitions of “qualifying tips” and “digital tipping”, and additional information regarding the treatment of agency workers.
This Code recognises that different businesses will receive and distribute tips in different ways. As such, it will be for each individual employer to determine which specific principles best apply to their business. Allocating and distributing tips fairly will not necessarily require employers to allocate the same proportion of tips to all workers. Rather, employers need to ensure they use a clear and objective set of factors, which are reasonable given the circumstances and nature of the individual business, to determine allocation and distribution. In deciding these factors, employers must be cautious to avoid direct and indirect discrimination.
The Code advises employers to consult with workers to seek broad agreement that their proposed system of allocating tips is fair, reasonable and clear. Employers will be required to maintain a written policy on how tips are dealt with and this must be readily available to workers.
In preparation for this Act coming into force, employers should review any existing tipping policies and practices to ensure they align with both the Act and the Code. Where employers of businesses which receive tips do not have such a policy, they should begin to formulate one now in order to be ready for when this becomes a requirement.
