Don’t short change your staff on tipping

By Craig McCracken, employment solicitor at Anderson Strathern

BEGINNING 1st October 2024, new UK-wide legislation on tipping will come into force, transforming the practices of restaurants and other hospitality venues, writes Craig McCracken.

This new legislation requires tips to be distributed fairly to all workers without any deductions. Additionally, businesses must maintain a written policy and keep records of how tips are managed.

The new legislation introduces several challenges for Scottish hospitality outlets and, if not adhered to, could have substantial financial consequences for businesses with awards of up to £5000 per employee to reflect losses suffered. 

The broader implications of the new legislation could also present unforeseen challenges for employers; the potential for uncapped compensation claims, particularly if tipping practices are found to be discriminatory, is a notable concern. 

To navigate the new legislation and effectively minimise risks, employers should establish a clear and comprehensive tipping policy. Relying on generic templates from the internet may come with risks, as often they will not fit the specific nuances of your business.

Instead, the policy should accurately reflect tipping practices to ensure compliance with the new legislation. It should be shared with all workers and clearly outline how tips will be distributed among the workforce. Transparency is key; workers need to understand the rationale behind the distribution method, especially if the same proportion of tips are not allocated to all workers. 

There may be legitimate reasons for businesses to not allocate the proportion of tips equally to all workers, however it is important that the reasons for doing so are clearly communicated and documented to avoid perceptions of unfairness or potential claims of discrimination. 

By being upfront and transparent, employers can develop an atmosphere of trust and fairness within their business, which is essential to maintaining a positive working environment. 

Secondly, maintaining detailed and accurate records of tips and their distribution is not only going to be a legal requirement, but also a crucial practice to defend against potential disputes. If there are inconsistencies in your tipping records or it shows that tips have not been distributed fairly, this information can be used by employees to bring a claim against your business. 

Ensuring you’re ready to respond promptly to employee requests for information is another must. Under the new legislation, employees have the right to request sight of tipping records.  

Employers must respond within four weeks from the date it was requested, so it is imperative to be able to handle these requests promptly. 

By doing so, employers can prevent escalation of a potential issue and demonstrate commitment to fairness. Failing to provide this information timeously can damage employee trust and lead to legal challenges. 

While the new legislation focuses on ensuring that tips are distributed to employees fairly without deductions, businesses should also be vigilant about the broader implications. 

There is a risk of discrimination claims if tipping practices are not perceived as fair. 

For example, if tips are distributed in a way that disproportionately puts certain groups of workers at a disadvantage, it could lead to claims of indirect discrimination. Employers must take care to ensure that their tipping policies do not disadvantage any group based on characteristics such as sex, race or religion, disability, or age.

Furthermore, the new legislation could give rise to whistleblowing claims if workers believe that their employer’s tipping practices are not compliant with the new legislation. Whistleblowing protections are robust, and compensation in such cases can be substantial, with no upper limit. 

The new UK tipping legislation presents challenges and opportunities for the Scottish hospitality industry. 

By establishing a clear tipping policy, maintaining detailed and accurate records, and responding promptly to information requests, employers can navigate these changes effectively. 

However, the broader risks highlight the need for ongoing vigilance and a commitment to fairness and transparency. 

By taking these steps, employers can not only ensure compliance but also promote a positive and equitable workplace culture.