Tipping law set to come into effect this Autumn

Changes in the law over receiving tips from clients are expected to come into effect from October in England, Wales and Scotland. However, business owners are being encouraged to follow new requirements outlined in the recently published Code of Practice immediately before they come into legal effect. 

The Employment (Allocation of Tips) Act 2023 aims to protect services charges paid by customers to more than 2 million workers, including those within the hair and beauty sectors.

When the Act is introduced, it will be unlawful for a business to hold back any services charges from employees without deductions, ensuring they receive a fair share of any tips paid to recognise customer service. Tips cannot be counted towards paying staff National Minimum Wage.

This Code of Practice, which has been laid down before Parliament, will be statutory for all employers, meaning it can be used as evidence in an employment tribunal.

Under the Tipping Act, sectors that benefit from a high tipping culture, such as hair and beauty, will be required to have a written tipping policy. All employees must have access to the policy
which should cover how tips are accepted, allocated and distributed, and the steps the employer it taking to ensure tips are handled in accordance with the law.

Tips do not have be split equally between employees, and employers may take into consideration a clear and objective set of factors to determine the allocation and distribution of tips. This could include the type of role/work e.g. distribution between front of house and therapists and stylists, basic pay, hours worked during the period when a tip is received, individual and/or team performance, seniority/level of responsibility, length of time served with the employer and customer intention. However, employers must avoid any form of unlawful discrimination when selecting factors. 

Commenting on the Employment (Allocation of Tips) Act 2023, Kevin Hollinrake, Business and Trade Minister, says:

“It is not right for employers to withhold tips from their hard-working employees.

“Whether you are cutting hair or pulling a pint, this government's legislation which will protect the tips of workers and give consumers confidence that when they leave a tip, it goes to the hardworking members of staff.”

The measures are expected to come into force on 1st October 2024, once they have been approved by Parliament and apply to all industries. They do not apply to Northern Ireland where employment law is devolved. 

Familiarise yourself with the Code of Practice now to ensure that you're compliant.