The Secretary of State for the Department for Business and Trade (DBT) is publishing this Code to promote fairness and transparency in the distribution of tips that fall in scope of the Employment (Allocation of Tips) Act 2023.
The Employment (Allocation of Tips) Act 2023 will cover England, Scotland and Wales and is designed to ensure tips, gratuities and service charge are fairly distributed to staff.
It comes into effect on 1 July 2024. This Code applies to England, Scotland and Wales and will be reviewed periodically to ensure it remains up to date. The Code will give employers and workers in hospitality and other tipping sectors more detail on ‘fair and transparent’ allocation of tips. It will include guidance on how tips can be gathered and distributed, factors which should be considered when distributing tips, and details on transparency measures including the requirement to keep a written tipping policy and to maintain accurate tipping records. Once the Code and other measures in the Act are in place. consumers can also have greater confidence when leaving tips to recognise good service.
The purpose of the Employment (Allocation of Tips) Act 2023 (referred to as “the Tipping Act” is, the government says, to ensure the fair and transparent allocation of all tips, gratuities and service charges.
The Tipping Act is seeking to to improve fairness for workers by ensuring that the tips consumers leave in recognition of good service and hard work are going to the workers as intended. The Act aims to increase fairness in tipping practices and create a level playing field for employers who already allocate all tips to workers by ensuring that all employers follow the same rules.
The Tipping Act was granted Royal Assent on 2 May 2023. It amends the Employment Rights Act 1996 (“the 1996 Act”) so that employers are now required to:
- pass on all tips and service charges to workers without deductions, except in very limited scenarios, such as deduction of income tax
- ensure that tips are distributed in a fair and transparent manner when the employer takes control, or exerts significant influence, over their distribution
- have regard to this code of practice on fairness and transparency of tip distribution when they are distributing or influencing the distribution of tips
- maintain a written policy on how tips are dealt with at their place of business, and ensure this policy is made available to all their workers
- maintain a record of all tips paid at their place of business and their allocation and distribution between each worker, to which workers have the right to request access
Employers must have regard to the Code when designing and implementing their tipping policies and practices. It is recommended that all parties attempt to resolve issues locally in the first instance.
Kevin Hollinrake Minister for Enterprise, Markets and Small Business said: “We want this Code to be useful for workers and employers in tipping industries. Its intention is to provide statutory guidance on how employers can meet the requirements of ‘fair and transparent’ distribution of tips under the Act. I would welcome employers, workers, representatives, and consumers from all tipping industries to respond to this consultation.”
“This legislation is part of our wider commitments to protect workers’ rights and to ensure the UK is the best place in the world to grow a business.”