A new code of practice requiring foodservice businesses in England, Wales, and Scotland to ensure 100% of tips and service charges are given to staff came into force yesterday (1 October).
The Department of Business and Trade (DBT) highlighted that should an employer – such as a bakery café or coffee shop – break the law by retaining tips, a worker will now be able to bring a claim to an employment tribunal. Employers in the wrong could be made to pay fines or compensation to staff, with workers able to hold bosses fully accountable, it added.
‘Most employers already pass on tips to the staff who earn them; however these laws will crack down on the minority of businesses who continue unacceptable tipping practices,’ stated the DBT, noting estimates that the changes will mean around £200m extra in the pockets of workers.
The previous government had planned to implement the new code, which relates to the Employment (Allocation of Tips) Act 2023, on 1 July 2024 after it received Royal Assent in May of last year. However, its launch was subsequently pushed back by three months to allow businesses more time to introduce any changes required.
A few weeks after the Labour party won the election, the new government issued statutory guidance on the code. This reaffirmed that the desired outcome of the Tipping Act, which applies to England, Scotland and Wales but not yet Northern Ireland, is to improve fairness for workers by ensuring that the tips consumers leave in recognition of good service and hard work are going to them as intended.
It also aims to create a level playing field for employers who already allocate all tips to workers by ensuring that all employers follow the same rules.
As outlined in the Act, employers are required to pass on all tips, gratuities, and service charges to workers without deductions, except in very limited scenarios such as deduction of income tax. The method of payment (e.g. by card, in cash, or via an app) does not determine whether it is a qualifying tip for the Act.
However, not all tips fall under the scope of legislation. These include cash tips received directly by a worker without any employer involvement or digital tipping, whereby a customer uses an app to directly tip members of staff, bypassing the employer altogether.
An employer may receive the tips directly and then pay workers their fair share as part of the next monthly payroll cycle. They must maintain and make readily available a written policy on how tips are dealt with at their place of business and are encouraged to consult with workers to seek a broad agreement for the fair, reasonable, and clear allocation of tips.
For the purposes of fairness, the guidance says employers should ensure they give equal weight to queries from agency workers as they do to their own, directly employed, staff. It recommends following the code of practice of independent statutory body Acas on disciplinary and grievance procedures. Should issues remain unsolved, agency workers can enforce their rights through the employment tribunal system under the Tipping Act.
Additionally, the law sets out that tips must be distributed between workers at the place of business where the tips are received and cannot be pooled across multiple sites of operation or different branches.
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