On 3 March 2023 the Employment (Allocation of Tips) Bill (‘the Bill’) had its second reading in the House of Lords as it progresses on its way towards becoming law.

A 2021 press release from the department of business, energy and industrial strategy suggests that up to two million workers in the hospitality sector could benefit from the changes being proposed, which would require employers to ‘fairly’ allocate 100% of tips, gratuities, and service charges (collectively referred to as tips) to their workers.

The desired outcome of the Bill is to improve fairness by ensuring that the tips consumers leave in recognition of good service and hard work are going to the workers as intended. 

The Bill proposes that:

• Employers must take account of a statutory code of practice (‘the Code’) when complying with their obligation to allocate tips fairly. The Code, which is being developed with the assistance of stakeholders representing employers and workers, will set out the principles of fairness and transparency.
• Tips must be allocated and paid to workers no later than the end of the month following the month in which they were paid by the customer.
• Tips must be fairly allocated by employers between agency workers and the workers they directly employ.
• Employers must keep written records of how tips have been accounted for and retain these records for a minimum of three years.

Employers should consider reviewing their practices and policies for dealing with tips and consider whether any amendments or adjustments are necessary before the Bill becomes law. If the Bill is passed unchanged and becomes law, employees and agency workers will be able to present a complaint to an employment tribunal if their employer fails to pass on tips in accordance with the new legislation and accompanying Code. Employers found in breach of these responsibilities may be ordered to compensate the worker for financial losses up to £5,000.

 

This article reflects the position at the date of publication 14 March 2023. If you are reading this at a later date you are advised to check that that position has not changed in the time since. 

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