Tipping Act to be introduced on 1 October 2024

The new ‘Tipping Act’ will come into force on 1 October 2024.

The new Employment (Allocation of Tips) Act 2023 – also known as the Tipping Act – is to be introduced on 1 October 2024. This was confirmed by the commencement regulations laid before Parliament on 30 July 2024. The Act was originally scheduled to come into force on 1 July 2024 but was delayed in anticipation of the results of the general election. The extension provides businesses with additional time to prepare for the upcoming changes.

Under the new legislation, businesses that receive tips from customers will be required to comply with the new legal requirements for allocating and paying tips, gratuities, and service charges to their workers, including those on zero-hours contracts and eligible agency workers.

The Tipping Act covers both monetary and non-monetary ‘tips’ received or controlled by the employer. For instance, this may also include casino chips or certain vouchers. However, tips received directly by workers, without employer control, will not fall under the scope of the new legislation.

Those affected will be required to:

• pass on all tips and service charges to workers without deductions, except in very limited scenarios (for example, deduction of income tax)
• allocate tips to workers in a fair and transparent way
• have an appropriate written policy on the allocation of tips in place and readily available to workers
• maintain records of tips distributed, which must be provided to workers upon request.

Businesses will welcome that the Tipping Act will be accompanied by the Code of Practice on Fair and Transparent Distribution of Tips, which is also due to come into force in October this year. The code of practice aims to provide businesses with more clarity on what can be considered a ‘fair and transparent’ allocation of tips.

Businesses that fail to meet the requirements may face tribunal claims and financial penalties of up to £5,000. If the employment tribunal finds that tips have not been allocated fairly and transparently, it may issue an order requiring the business to revise the previous tip allocation and compensate not only the complainant, but all affected workers.

Those affected should review and amend any current policies they have in place. If no policies are currently in place, it is time to introduce them ahead of 1 October 2024.

If you need guidance following the latest updates, please get in touch with our team of expert employment lawyers.

Our Legal 500-rated employment law & business immigration team are experts in guiding businesses of all sizes and backgrounds through a range of issues that may arise, including those related to updated legislation.