An overhaul of tipping practices is soon to take effect on 1 October 2024 when the Employment (Allocation of Tips) Act 2023 (the "Act") comes into force.  

According to a Government report earlier this year, the changes to tipping practices are set to impact more than 2 million UK workers across the hospitality, leisure and services industry and will mean that UK workers will take home an estimated £200 million more of their hard-earned cash. 

The Act was introduced to ensure the fair and transparent allocation of all tips, gratuities and service charges. It also aims to create a level playing field for employers who already allocate all tips to their workers. 

A full range of new measures will be introduced under the Act, including:

• a new duty on employers to ensure that all qualifying tips are allocated fairly between workers;
• a prohibition on deductions from tips and service charges collected;
• a requirement for relevant employers to have a written policy on how they deal with tips;  
• a new right for workers to request a copy of their tipping records; and 
• a new right for agency workers to receive tips. 

When designing and implementing tipping policies and practices, employers must also have regard to the new Code of Practice which sets out the overarching principles of fairness for the purposes of the Act; the area in which employers need to make decisions to comply with their duties; and how they should apply these principles in their specific places of business. Further guidance to accompany the Code of Practice is expected to be published in due course. 

The implementation of the Act has been welcomed by many unions across the UK, including Unite, which has launched its Fair Pay and Fair tips campaign as part of which it plans to ‘name and shame rogue employers who try to ignore or distort the new legislation’.

The Act also opens up employers to new potential claims in the Employment Tribunal. From 1 October 2024, workers, including agency workers, will be able to make a complaint to the Tribunal where their employer (and/or agent) has breached their statutory obligations under the new Act. An employer could face a sizeable sum of up to £5,000 in compensation per worker where they are found to be in breach of the new obligations. 

The Act also widens the scope for potential claims for unlawful deduction of wages claims, as it incorporates tips in the definition of wages. 

Given the significance of some of these changes, they may take time to implement and so employers in the industry should now be taking steps to prepare for these measures. Steps should include reviewing the Code of Practice, auditing current tipping arrangements, and considering what changes may be required in readiness for the new measures coming into force. Existing service charge policies should also be reviewed or, where there is no existing policy, one should be put in place. 

If you have any questions about how these developments may affect your business, please do get in touch. 

This article was co-authored with Shannon Willett.