The tipping landscape is undergoing significant change with new non-statutory guidance from the UK government aimed at promoting fair distribution of tips between employees. This aligns with the introduction of the Employment (Allocation of Tips) Act 2023 and the Code of Practice on Fair and Transparent Distribution of Tips, effective from 1 October 2024.
What is the purpose of the reform?
The primary goal of the reform is to enhance fairness and transparency in the service industry, ensuring that workers receive the full amount of tips, gratuities and service charges they earn. This initiative is designed to address long-standing wage concerns in the service sector, where many employees rely heavily on tips as a significant portion of their income. By establishing a more stable and predictable financial foundation, the reform aims to foster an environment where the hard work and dedication of service workers is recognised and rewarded.
Implications for agency workers
Agency workers will be significantly impacted by this reform, which ensures they are not disadvantaged due to their employment status. The guidance mandates that tips must be distributed fairly, including for agency workers alongside directly employed staff. Company policies on tips should apply equally to all workers, ensuring everyone’s contributions are acknowledged and compensated.
Location-based tip distribution
The guidance clearly states that tips collected at different branches or sites should remain local, rewarding the workers who earned them. Instead of pooling tips into a central fund, they must be shared among the employees at the specific location where they were given. This approach ensures that those who directly enhance the customer experience benefit from their efforts.
Practical takeaways
Employers are now tasked with ensuring that every worker directly involved in delivering customer service gets their fair share of tips. To do this effectively, it is crucial to be clear on who will qualify under the tipping policy. Wording should specify which roles will, or will not, be included in distribution along with justification for how they have a direct link to the service received by customers. For example, it would be common to include waitstaff, bartenders and door porters but an external reservation manager would usually be excluded.
Here are the key steps necessary to align with the new requirements:
- Review your current tipping policy or create one that reflects these changes.
- Keep records of all tipping transactions, including accounts of how tips are distributed and to whom they are paid.
- Communicate any policy updates and this guidance to all staff involved in tip distribution.
- Proactively address any disputes that arise, seeking assistance from Acas if necessary.
By taking these steps, employers can create a tipping environment which meets the new requirements and recognises the hard work of all service staff.
If you have any questions, please contact a member of the Employment team.
