As of 1st October, the Employment (Allocation of Tips) Act came into force that ensures workers keep 100% of the tips, gratuities, and service charges they earn. While many employers already pass on tips to staff, this new legislation will close loopholes so that all tips go directly to workers.

What changed for employers?

Under the new law, employers are legally required to pass all tips, gratuities, and service charges on to their staff without making any deductions. This means that if a customer leaves a tip, whether it’s in cash or through card payments, it must go to the workers.

Businesses that fail to follow these rules could face serious consequences. Workers now have the right to take their employer to an employment tribunal if they believe their tips have been unfairly withheld. This means that employers could be ordered to pay fines or compensation to affected staff members.

To avoid any potential issues, it’s crucial for employers to review their tipping policies and ensure they’re fully compliant with the law. Transparency is key, and businesses should make sure they have a clear and fair system in place for distributing tips.

Have you prepared for the changes?

With the new laws already in effect, employers should already be familiar with the statutory Code of Practice on fair tipping. This code provides detailed guidance on how tips should be fairly distributed among workers. The rules apply across sectors in England, Scotland, and Wales (For Northern Ireland, employment policy is devolved), and employment tribunals will consider this code when handling disputes.

If you’ve not done so already, it’s a good idea to review your tipping policies, train your staff on the new procedures, and ensure that your systems for handling tips comply with the law. The government has also issued some non-statutory guidance to help employers.