Will the Changes to UK Tipping Laws Affect Your Business?Withholding tips from staff members will soon be illegal

Tipping is common across a range of industries, with significant variance between countries.

In the US, tipping is incredibly common and considered part of an employee’s salary in many roles.

There are multiple professions which over 50% of Americans believe are worthy of tips.

While the UK doesn’t have as widespread a tipping culture, the restaurant industry is one where tipping is the norm.

95% of UK consumers leave a tip when eating out. As such, restaurant workers expect tips to supplement their income in many cases.

However, the rules and customs around tipping aren’t currently clear, particularly in the UK.

That’s set to change in 2024 when a new bill will come into effect. The Employment (Allocation of Tips) Act 2023 is in its final review stages and will soon be enshrined in UK law.

So what will your business need to do to comply? Below are our quick takeaways, though we recommend reviewing the full legislation for yourself.

Distribute tips fairly and completely

The new legislation will state that all tips received must be distributed to employees. Deductions can’t be made to cover any administrative costs except for tax, meaning employees stand to take home a lot more pay.

It’s been estimated that £200 million a year will be passed onto over 2 million staff this way. The hospitality, leisure and services sectors have been identified as those most likely to see significant changes.

Under the new bill, tips must also be dished out fairly, with temporary or agency workers given equal treatment to permanent employees. Further guidance is expected to be published, in the form of a statutory Code of Practice, to outline what constitutes the fair distribution of tips.

Make a clear written policy available to all employees

This fair division of tips will be required to be broken down explicitly in a written policy that businesses will need to make available to all their employees.

There is as of yet no guidance around how this needs to be completed. As such, it is likely that businesses will either create standalone documents on their tips policy or add a section to their employee handbook.

Any policy will need to outline how tips will be recorded, divided, and how they’re paid out to staff. This includes when tips will be shared out, which must be no later than the end of the month after the tip was given.

We recommend keeping guidance as clear and transparent as possible, while ensuring that all likely eventualities and exceptions are covered. For instance, it will also be useful to provide clarity on what effect holidays or other leave will have on the share of the tips an employee receives.

Keep a record of all tips and their distribution

Appointing a member of staff to be responsible for tips will make it easier to ensure all tips are recorded and collected properly.

Some business already have this in place, naming a ‘tronc master’ to carry out these duties. Using a flexible shift scheduling solution can make it easier to ensure you have this role covered during every shift.

Employees will also be able to request more information on your business’s tipping record to support employment tribunal claims, so accurate record-keeping will be essential.

Budget for the changes

Also consider the extras costs that this bill may introduce. Having to absorb the time taken to manage tips, as well as card processing fees, may not be something you’ve previously budgeted for.

Ensure your business is in a good position to continue operating profitably after this legislation comes in.

While the new tipping laws are still at least a few months away, planning and preparing now for how you might handle them will put your business in a good position, and avoid any nasty shocks closer to the time.

Keeping an eye on the legislation as it passes through the UK government, and staying abreast of any additional supporting material, is likely to make your business’s transition easier.

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