By Lee Jefcott, head of the Leisure and Hospitality sector group at leading independent law firm Brabners. (www.brabners.com/sectors/retail/leisure-and-hospitality)
Many hospitality workers rely on customer tips to top up their pay – especially amid the current cost-of-living crisis. Yet traditionally, employees have been left powerless if businesses don’t pass on service charges from customers to their staff.
However, this is now set to change. Last year the government introduced the Employment (Allocation of Tips) Bill, which has now made its way through parliament and is expected to come into force during 2024.
This overhaul of tipping practices is set to benefit more than 2 million UK workers across the hospitality, leisure and services sectors, helping to ease cost of living pressures and give them peace of mind that they will keep their hard-earned money.
It also places a greater obligation on employers to ensure that tips and gratuities are allocated fairly – and a failure to do so will prove costly. With this in mind, it’s important that hospitality operators are on top of the new legislation ahead of its introduction.
So, what does the Act say?
Simply put, hospitality employers will be legally obliged to allocate all tips, gratuities and service charges to workers – with no deductions for breakages or any other costs.
Tips must be shared fairly between workers and must be paid no later than the end of the month following the month in which the tip was paid. Employers will also have to share a written tips policy with all workers and keep records of all tips and service charges in the last three years, which must be provided to any worker who asks for it.
A key point worth noting is that the Act gives the same rights to agency workers as it does to employees.
Further guidance is expected when the government publishes its statutory code of practice – including advice on how tips should be allocated.
Employers that run a tronc system will still be able to do so under the new Act. However, those arrangements will need to be reviewed.
Compliance and claims
Formulating a written tips policy could be tricky while we are still waiting for further government guidance, but it may be helpful to consult with workers at this stage to incorporate their views – especially as those businesses that don’t comply with the new rules will leave themselves open to workers taking a claim to an Employment Tribunal.
Claims can be made if there is evidence that an operator has not allocated all tips and service charges to workers during the last three years. The Tribunal has the power to order an employer to “revise an allocation” or make payments to workers or categories of workers, with workers eligible for compensation of up to £5,000 each.
They also have the right to bring a claim if their employer does not provide a copy of their tips policy or a written records of tips when asked.
Risk to reputation
At a time when the country is experiencing a cost-of-living crisis, the danger of non-compliance isn’t just the cost associated with an Employment Tribunal. Indeed, in the era of conscious consumerism, the reputational impact could be far more dangerous, driving away both potential customers and employees.
By the same token, those employers who can demonstrate their commitment to fairness will find it pays dividends when it comes to recruiting and retaining staff, while enhancing their reputation with consumers too.
This Act has been in the pipeline for a while and should not be coming as a shock to any employers. However, hospitality or leisure operators that are unsure about how to apply the new rules should certainly consult with a specialist adviser.