The Employment (Allocation of Tips) Act 2023
The Employment (Allocation of Tips) Act 2023
On 2 May 2023, The Employment (Allocation of Tips) Bill received Royal Assent and is now law, although not yet in force.
The Act provides for:
employers to pass on 100% of tips to workers (including agency workers) with no deductions, other than those required by tax law;
the payment of tips to be made no later than the end of the month following the month in which the tip, gratuity or service charge was paid by the customer;
the issue of a statutory Code of Practice on Tipping to promote fairness and transparency in relation to the distribution of qualifying tips, gratuities and service charges;
employers, where qualifying tips, gratuities and service charges are paid on more than one occasion, to have a written policy, setting out how tips will be allocated fairly, or confirming why it is not subject to this requirement;
employers to keep records for three years detailing how tips have been dealt with, including the amount of qualifying tips received, and the amount of tips allocated to workers directly or through an independent tronc operator;
a right for workers to request records within the last three years (only one request can be made in any three-month period). Employers will be required to respond to any request for information within four weeks of the request.
The Act confirms that, if an employer has a compliant tronc system in place, it will be treated as having ensured that the total amount of the relevant tips is allocated fairly;
What happens if an employer fails to comply with the Act?
If an employer fails to comply with its obligations on how and when to deal with tips, a worker can issue a claim in the employment tribunal and, if successful, the employment tribunal:
must make a declaration to that effect;
could make an order requiring the employer to deal with the tips in accordance with the Act by revising any allocation made, making a recommendation regarding the allocation or requiring a payment to be made to one or more workers in accordance with the Act (including those who are not complainants); or
could make an order requiring the agent to make a payment to the eligible agency worker.
The time limit for these claims is twelve months beginning with the date of the failure to comply, which is a significantly longer period than the limitation periods in other employment claims.
If an employer fails to comply with its obligations to have a written policy or records, a worker can issue a claim in the employment tribunal and, if successful, the employment tribunal:
must make a declaration to that effect;
could make an order requiring the employer to comply with its obligations under the Act; or
could make an order requiring the employer to pay the worker up to £5,000 as compensation for any financial losses incurred as a result of the employer’s failure to comply with its obligations under the Act.
The time limit for these claims is three months beginning with the date of the failure to comply.
What happens next?
The Act will come into force in 2024, with the date of commencement due to be announced later this year. Given the potentially significant penalties for non-compliance (particularly the possibility of awards being made to all relevant staff, even those who do not bring Tribunal proceedings), employers affected by the Act should begin considering any changes they will need to make to their current practices, including drafting policies and keeping records to demonstrate compliance with their obligations.
