New law on staff tips effective 1st October 2024

Allowing employees to keep their tips can boost morale and retention however current law does not require employers to pass on tips to their employees. Earlier this month, the government confirmed that new regulations will become effective from 1st October 2024, including the new tips Code of Practice as part of a new tips law. In our latest blog below, we have answered key questions around the new law, as well as a summary of what you can do before the new legislation is effective.

 

What is the new legislation on staff tips?  

As it stands, employers are not required to let employees keep all or part of their tips from customers. Employers also can't use tips to top up wages to meet National Minimum / Living Wage requirements. However, this will change from 1st October 2024, when the Employment (Allocation of Tips) Act 2023 comes into effect.

This new law mandates that employers must pass on 100% of qualifying tips, service charges, and gratuities to employees. Workers will also gain the right to request information about an employer’s tipping records, enabling them to make informed claims to an employment tribunal.

Additionally, a statutory Code of Practice on Fair and Transparent Distribution of Tips will guide businesses and staff on appropriate tip distribution.

 

Does the new tips legislation apply to all employers?

Yes, the new tipping law, effective from 1st October 2024, applies to all employers where qualifying tips are paid at or attributable to the business location on a regular basis.

 

What qualifies as a tip under the new law?

From 1 October 2024, employers are prohibited from keeping qualifying tips from employees. All qualifying tips must be fairly distributed to staff, including agency workers. Qualifying tips include:

• Employer-Received Tips: Amounts paid by customers as tips, gratuities, or service charges received by the employer or an associated person.
• Worker-Received Tips: Amounts paid by customers directly to the worker which are not subsequently received by the employer or an associated person.

If a worker keeps a cash tip with no employer involvement, it is outside the scope of the new law. Digital tips given directly to the worker through an app are also outside the scope of this law.

 

How do 'Troncs' fit into the new tipping legislation?

A tronc is a system used by some hospitality employers to distribute tips, service charges, and gratuities. Managed by a “troncmaster” (either the business owner or an employee), this system collects and distributes tips to the staff. The choice of troncmaster and how the tronc operates will affect the payments, particularly regarding PAYE administration.

From 1st October 2024, employers cannot keep any tip money and must pass it on to workers through a fair allocation method. Employers must have a clear policy on how tips are allocated.

 

Additional information for employers 

To comply with the new law on tipping effective from 1 October 2024, employers should:

• Review and update their current tipping policies and procedures.
• Ensure that all tips, service charges, and gratuities are distributed fairly among employees.
• Implement a transparent system for employees to request information about tipping records.
• Develop and communicate a clear policy on how tips will be allocated, including the role of any troncmaster if applicable.
• Stay informed about the statutory Code of Practice on Fair and Transparent Distribution of Tips to ensure compliance.

Employers should also be prepared to provide training for managers and staff on the new requirements to ensure a smooth transition and adherence to the new law.

 

If you have any queries or need assistance implementing any policy changes ahead of the new law becoming effective, please do not hesitate to ask. You can contact us on 07974 695 365 or email debbie@demoshr.co.uk.

Tags: Staff Tips Law, Employment (Allocation of Tips) Act 2023, Hospitality,