Fair Payment of Tips to Become Law
The Employment (Allocation of Tips) Act 2023 recently received Royal Assent, requiring employers to ensure all tips, gratuities and service charges paid by customers are allocated fairly between workers – a large impact on the hospitality and catering sector.
An enforcement date has not been announced yet, however, employers need to prepare as soon as possible, especially if you’re currently keeping tips as a business practice to pay other admin costs as this could impact your finances.
Consequences of not Complying with the New Tips Legislation
For many years, the practice of employers taking a proportion of workers’ tips has been viewed as unfair and immoral. Businesses that continue to withhold workers’ tips will gain bad reputations among staff, which may lead to workers taking grievances to employment tribunals.
An employment tribunal can grant a worker compensation of up to £5,000 if it finds that an employer’s tipping practice is unlawful and can also grant compensation to other affected workers even if they haven’t brought a claim themselves. Staff could also submit complaints up to 12 months after an issue has occurred.
Workers’ rights would also entitle them to request information relating to their employer’s tipping records, which is why it will be important for companies to draft gratuity policies and keep records of how all tips have been dealt with in the last three years.
Helping you to prepare for the new tips legislation
The official date the legislation would become law should be confirmed later this year, and employers would need to create gratuity policies outlining how tips are distributed and whether tipping is encouraged by customers. Better records would also need to be kept of how all tips are dealt with.
Once a Code of Practice is developed and an enforcement date has been announced, it’s recommended to effectively communicate and explain the upcoming changes to workers across your business to avoid any future conflicts, and to reassure everyone that you’re aware of the new obligations.
We welcome the new legislation, as it could see an increase in people wanting to work in hospitality roles. As a trusted recruitment agency, we’ll work with our clients to effectively communicate these changes to our Blue Arrow candidates and help implement any changes to payment processes. If you’re new to Blue Arrow, contact us to learn more about our services.
