On 1 October 2024, the Employment (Allocation of Tips) Act 2023 and the statutory Code of Practice on Fair and Transparent Distribution of Tips will come into force. The Act introduces obligations on employers to “fairly” allocate tips to workers, as well as to have a tips allocation policy and to retain allocation records. The accompanying Code of Practice contains guidance on how the Act will work in practice.
The Tips Act introduces the following obligations on employers:
The Act does not define what constitutes a “fair” allocation but requires consideration to be given to any factors set out in the Code of Practice. The non-exhaustive list in the Code of Practice of factors to be considered include the worker’s role, basic pay, hours worked during the period, performance, seniority, length of service and customer intention. Employers are encouraged to consult with their workers to seek broad agreement to the allocation process to ensure it is fair, reasonable and clear.
! Note: employers will need to be careful to avoid indirect discrimination issues arising from their allocation of tips.
Under the Tips Act, workers are able to bring a claim against their employer for failure to fairly allocate tips within 12 months of the employer’s failure. This is significantly longer than the usual 3-month limitation period for claims to the employment tribunal. A worker can also make a complaint to the tribunal where an employer has failed to comply with their obligations to have a written policy or keep records of allocations but this must be brought within 3 months of the employer’s failure.
For both complaints under the Tips Act, the tribunal must make a declaration if it finds the worker’s complaint to be well founded and it may award compensation of up to £5,000 (which can be subject to the 25% uplift / reduction where the ACAS Code of Practice on Disciplinary and Grievance Procedures is also relevant).
Hannah Ball comments:
Employers, especially in the hospitality sector, will want to pay close attention to ensure compliance with the new Act and the guidance in the accompanying statutory Code of Practice. While employers seem to have a degree of flexibility to choose the factors they take into account when establishing fair practices, their policies and procedures in relation to both employees and workers will need to be reviewed alongside the Code of Practice to ensure the factors used are appropriate. Employers will also need to be mindful of the 12-month limitation period for workers to bring a claim which may increase the risk of litigation where employers have failed to comply with their obligations.
If you have any questions on the Tips Act or the Code of Practice, please contact a member of the team here.
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