27th February 2024
The Act applies to any employee receiving tips and any employer handling tips. Particularly relevant for the hospitality industry where tipping is most common.
The purpose of the Act is to ensure the fair and transparent allocation of all tips, gratuities, and service charges to workers.
The Act covers how employers must deal with “qualifying tips”. These are tips, gratuities, and service charges received and on which employers are likely to have exercised either control or significant influence over the distribution of. Now that most transactions are paid using a bank card and therefore any tips received are banked by the employer, we expect that every employer will be exercising control over a large portion of tips received.
The Act does not cover cash tips which a worker receives and keeps, which the employer has no control over or involvement in.
The Act will come into force from 1 October 2024 in England, Scotland and Wales.
It should be noted that this does not necessarily mean the employer has to allocate the same proportion of tips to all workers, but employers should have a clear and objective set of factors to determine the allocation and distribution of tips. Examples of factors that could be considered in the implementation of a tipping policy and the distribution of tips are: individual and/or team performance; length of service with the employer; the seniority or level of responsibility of the employee; and the customer’s intention of who should benefit from the tip paid.
The government has issued a draft Code of Practice to help employers implement the provisions of the Tipping Act. We expect the final version to be published soon. Further information can be found here.
Please talk to your usual contact at Thompson Jenner to find out how we can help with the implementation of a suitable system.