A Bill making it unlawful for businesses to hold back tips from their employees has today (May 2) received Royal Assent, and is expected to come into force nationally on October 1st.
The Department for Business and Trade estimates that workers will take home an estimated £200 million more as a result of employers being banned from withholding tips under the Employment (Allocation of Tips) Act 2023.
The Act not only covers cash tips controlled by employers, but those paid via credit or debit cards as well.
UK Business Minister Kevin Hollinrake said: “As people face rising living costs, it is not right for employers to withhold tips from their hard-working employees.
“Whether you are pulling pints or delivering a pizza, this new law will ensure that staff receive a fair day’s pay for a fair day’s work – and it means customers can be confident their money is going to those who deserve it.”
UK Hospitality chief executive, Kate Nicholls, commented: “Fantastic hospitality experiences don’t happen without a huge effort from our teams, both front and back of house, and tips are a generous way of customers showing their gratitude, while providing a welcome boost to employees’ earnings.
“We’re pleased to support this new piece of legislation as it comes into law today and look forward to working with Government and other stakeholders on a code of practice that ensures a fair distribution of gratuities amongst all who contribute to providing great hospitality.”
Employment law experts have warned that bars, cafes and restaurants will need to be able to prove that their staff are receiving a fair share of tips left by customers.
Lawyers at independent Scottish legal firm Lindsays have already issued advice to clients – including those in the hospitality, leisure and service sectors – to help them get ready for the change.
Kate Wyatt, a partner in employment law at Lindsays, said: “Thousands of businesses across the country will need to be able to show that eligible colleagues receive every penny of tips that they are fairly entitled to.
“While the majority of businesses where tips are given already ensure they are shared among staff, employers would be wise not to overlook the responsibilities this new law places on them,” advised Wyatt.
“Clear processes will need to explain to staff how tips will be allocated and on what basis. Critically, all qualifying tips need to be shared without any deductions.”
The proposed new law states that where the employer receives or exercises control or significant influence over the distribution of tips that they must be ‘allocated fairly’ to workers, including agency staff.
They will have to be paid no later than by the end of the month following that in which the tip was paid by the customer.
As part of the rules, workers will have the right to see an employer’s tipping policy, their tipping records and be able to use the code of practice as evidence at any employment tribunal.
Any businesses found not to be complying could face a penalty of up to £5000 per employee and an order on how it has or should allocate tips in the future.
Wyatt added: “Some will undoubtedly see this as another piece of red tape and administration that they could do without.
“But the price of failing to do this correctly could be high – not only if you find yourself sanctioned for not complying with the legislation, but reputationally as you try to attract staff in what’s already a challenging sector for recruitment.
“Our advice would be to not wait until the last-minute to try and get your procedures in place for dealing with this.”
It was also stressed that tips cannot legally be used to count towards minimum wage pay.
