Recent headlines have highlighted that millions of service industry workers are set to benefit as a new Code of Practice relating to tipping is published, a move that aims to ensure they receive a fair share of tips, gratuities and service charges in their take home pay but what is the impact for employers? Â The Code of Practice will have legal effect under the Employment (Allocation of Tips) Act 2023.
The Code looks to increase transparency on how tips are recorded and shared, to provide fair compensation to employees and to provide reassurance to consumers that when they leave a tip that it is retained by the person they wish to reward for good service. It includes the requirement for employers to have a written policy on how tips are managed within their business.
Government and lobbyists have long held that due to unfair practices by some hospitality, leisure and service sector businesses, employees have been missing out on tips they have worked hard to earn. Experts estimate that figure could be as much as £200 million. Workers will be able to use the Code as evidence in an employment tribunal.
The legislation will place legal duties on employers, making it unlawful for businesses to hold back service charges from their employees, ensuring staff receive 100% of the tips they have earned. It will become illegal for employers to deduct any administration or handling fee, including credit card payment charges from tips. The tax and/or national insurance treatment of tips is unchanged by the new regulations. The measures are expected to come into force on 1st October 2024, once they have been approved by Parliament.
The Government is encouraging all businesses to follow the new requirements immediately, before they come into legal effect. These new measures will apply to England, Scotland and Wales and will apply to all industries.
We can help business owners to navigate the new legislation and how best to implement any changes to practices and policies, including a review of existing tronc arrangements. Contact Elaine Cromwell at ecromwell@thomsoncooper.com for more information.
You can read the Tipping Code of Practice for Employers here.