New Rules on the allocation of tips from 1 October 2024
The Employment (Allocation of Tips) Act 2023 will come into force on 1 October 2024. This will impact service sectors such as the beauty industry and the hospitality industry where tipping is common.
Cash tips which are passed to employees directly from the customer become the legal property of that employee and (subject to the internal procedures of that business) the employee can keep the cash tip.
The difference with service charges or tips paid by card is that these are paid to the employer and therefore become the legal property of that employer. Some companies are not passing these tips to their staff and this legislation is indented to stop this from happening.
Tips passed directly to employees in cash will only be classed as “qualifying tips” if they are subject to employer’s control. So, for example they must be handed into the manager during the shift.
Tips that are made via card machines or service charges will always be classed as “qualifying tips” and are covered by the scope of the legislation.
The employer must ensure that all qualifying tips and service charges are allocated fairly between employees. In most cases the tips must be paid to the employee no later than the end of the month following the month in which the tip was paid.
In terms of “fair allocation” the code of practice states:
Employers that deal with tips on a regular basis must have a written policy which sets out what is regarded as a “qualifying tip”, when tips will be paid and the methodology applied to the payment of the tip. Employers are also required to keep records of how every tip has been dealt with, this information must be kept for three years.
If tips are not paid in line with the new legislation then this could be an unlawful deduction to wages for which the employee may make a claim against their employer.
If you have any questions about this new legislation, then please do not hesitate to get in touch.
Cash tips which are passed to employees directly from the customer become the legal property of that employee and (subject to the internal procedures of that business) the employee can keep the cash tip.
The difference with service charges or tips paid by card is that these are paid to the employer and therefore become the legal property of that employer. Some companies are not passing these tips to their staff and this legislation is indented to stop this from happening.
Tips passed directly to employees in cash will only be classed as “qualifying tips” if they are subject to employer’s control. So, for example they must be handed into the manager during the shift.
Tips that are made via card machines or service charges will always be classed as “qualifying tips” and are covered by the scope of the legislation.
The employer must ensure that all qualifying tips and service charges are allocated fairly between employees. In most cases the tips must be paid to the employee no later than the end of the month following the month in which the tip was paid.
In terms of “fair allocation” the code of practice states:
- There must be justification for paying different proportions to different workers
- All workers involved in the service must be included in tip distribution (including agency workers)
- Employers must ensure they do not allocate tips in a discriminatory way
Employers that deal with tips on a regular basis must have a written policy which sets out what is regarded as a “qualifying tip”, when tips will be paid and the methodology applied to the payment of the tip. Employers are also required to keep records of how every tip has been dealt with, this information must be kept for three years.
If tips are not paid in line with the new legislation then this could be an unlawful deduction to wages for which the employee may make a claim against their employer.
If you have any questions about this new legislation, then please do not hesitate to get in touch.