Do Your Employees Receive Tips

New laws coming into force from 1^st October 2024 regarding tips for employees under The Employment (Allocation of Tips) Act 2023. This includes other tip related schemes such as gratuities and service charges.

ALL tips have to be distributed fairly between employees, none can be kept by the company. No deductions can be made including admin fees.

The act mostly covers tips which the employer receives before distributing to the employees for example, card payment tips. The method of payment does not determine whether a tip falls under this act.

If an employee receives a tip directly this does not fall under the Tipping Act.

Tips must be passed to employees by the end of the month following the month in which the tip was left.

Employers will be required by law to have a policy which sets out how they fairly allocate tips to their staff and must be in line with the statutory code of practice for complete transparency with employees.

Failure to comply with the new laws surrounding tips can result in £5000 maximum compensation payment.

Employees will also have a right to request a copy of their tipping record so a full history must be kept per employee and can dispute their tip allocation for up to 12 months after an issue.

Tips cannot be counted towards minimum wage but please remember that all tips should go through the payroll as taxable income.

You may wish to decide to appoint a tronc operator to distribute staff tips.

Further information can be found via the links below

https://www.gov.uk/government/consultations/distributing-tips-fairly-draft-statutory-code-of-practice/outcome/explanatory-memorandum-to-the-updated-draft-code-of-practice-on-fair-and-transparent-distribution-of-tips

https://www.gov.uk/government/consultations/distributing-tips-fairly-draft-statutory-code-of-practice/draft-code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

https://www.gov.uk/guidance/employee-gets-tips-gratuities-or-service-charges-through-a-tronc

Please get in contact if you have any questions.