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The government has announced that the Employment (Allocation of Tips) Bill received royal assent on 2 May 2023 formally becoming the Employment (Allocation of Tips) Act 2023. It is estimated that the new laws on Tipping will result in workers to receiving up to £200 million in tips that would have otherwise been deducted from wages.

Plans to reform the laws on Tipping were first introduced in 2018 however this has been the first significant proposal for change that we have seen in recent years. The new legislation is estimated to impact around 2 million workers across hospitality, leisure and service sectors who often rely on this extra income to boost their take home pay.

The intention behind the new legislation is to prevent employers from retaining all or part of the tips paid, as is the current practice by some businesses. According to statistics, deductions of between 3-5% is common amongst employers within the hospitality industry.

The Act will create new obligations for employers including the following:

1.      Employers will be required to fairly allocate tips and pay these to workers in full within one month of payment being made by the customer;

2.      Employers will need to implement written policies to set out how tips will be distributed in their businesses

3.      Employers are to maintain a record of tips received and how they are allocated and this record is to be kept for three years. Employees will also have the right to request access to these records if needed.

To coincide with the introduction of the new laws, the government are also proposing to issue a statutory code of practice which will set out the fair and transparent procedure to be followed by employers when distributing tips amongst workers. A failure to comply with this code will be admissible in evidence in any Employment Tribunal claim.

If a worker believes they have not been treated in accordance with these new rules, they will be allowed to issue a claim in the Employment Tribunal within twelve months of the employer’s breach of its obligations.

Given the rising cost of living, there has been mounting pressure on the government to address this issue and it seems this is a positive step in the right direction to allow workers to claim all monies which they have rightfully earned and for customers to be reassured that their gratuities are going to who they intend.

The proposed code of practice will be subject to formal consultation later this year and it is expected that the new Act will be bought into force by May 2024.

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