Government publishes draft tipping code of practice

The government has published draft guidance on the upcoming tipping bill, which will come into force on 1 July 2024.

The Employment (Allocation of Tips) Act 2023 will cover England, Scotland and Wales and is designed to ensure tips, gratuities and service charge are fairly distributed to staff.

A consultation on the draft code of practice has been launched and hospitality businesses and workers have until 22 February 2024 to respond.

Key points at a glance

The bill is designed to promote the "fair and transparent distribution" of "qualifying tips", which are defined as where the employer has control over how they are allocated to staff.

If a worker receives and keeps a cash tip, with no employer control or involvement, they are not covered by the code.

Employers must apply a principle of fairness to how funds are shared out between permanent team members, agency staff and those on zero-hours contracts. This will not require them to distribute the same proportion of tips to all workers. However, the way tips are shared out should be based on a clear set of factors, such as the type of role and customer intention, and avoid any discrimination.

Employers should consult with staff on the way tips are distributed and this should be reviewed on a regular basis.

If a method is supported by workers, it may help an employment tribunal rule that a policy is considered fair and reasonable if there are any disputes.

Methods of distribution

The guidance says employers can receive tips directly and pay staff their share as part of the next payroll cycle.

They can also choose to allocate tips using a tronc system, which can be operated by an appointed member of staff, an external firm or a staff member elected and agreed upon by workers.

All tips must be shared with staff by the end of the month following the month in which they are paid. For example, if a customer leaves a tip on 23 June, it must be distributed by 31 July at the latest.

Transparency

The bill requires employers to have a written policy on how tips are accepted and shared out and how they ensure funds are being handled fairly.

Employees, including agency workers, must be made aware of their entitlement to tips for the policy to be considered fair.

Businesses may share their written policy with customers or display it, but it is not a requirement of the law.

All staff must be made aware of any changes to the policy.

The act will require businesses to keep a written record of all tips received and how they are allocated for three years, starting on the date the tip was paid.

Individual members of staff will have the right to make a written request once every three months to view the tipping record of their employer dating back up to three years.

The act will give staff members and agency workers the right to take complaints over tips to an employment tribunal, which could see them paid compensation.

For full analysis of the requirements of hotel and restaurant businesses sign up to join The Caterer's free Tipping and Payment Summit in April.

Click here to view the full guidance, and to take part in the consultation, click here.

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