New rules on distributing tips: Understanding the Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023, set to take effect on 1 October 2024, marks a significant shift in the management and distribution of tips within the hospitality sector. This new legislation is designed to ensure that tips are distributed fairly among employees, enhancing transparency and equity in the industry.

 

Key Provisions of the Act

  • Fair Distribution: All tips, whether received via cash or card, must be distributed fairly among employees. Employers are required to adhere to a Code of Practice, which may include a tronc system to manage the distribution process.
  • Prohibition of Deductions: Employers cannot make any deductions from tips except for those mandated by law, such as taxes. This move aims to prevent any administrative charges that could potentially reduce the tips employees receive.
  • Transparency Requirements: Employers must clearly outline and communicate their tipping policies to both employees and customers. This ensures that all parties understand how tips are handled and distributed.
  • Mandatory Record-Keeping: Detailed records of all tips received and their distribution must be maintained for at least three years. These records should be accessible to employees upon request.
  • Written Tipping Policy: A written policy detailing how tips are distributed must be established and made available to all staff members.
  • Treatment of Service Charges: Service charges added to bills must be treated as tips and distributed accordingly.

 

Impact on Employers and Compliance Strategies

For employers in the hospitality industry, the new rules necessitate a thorough review and possibly a redesign of how tips are managed:

  1. Review and Update Policies: Employers should examine existing tipping policies and adjust them to comply with the new legislation. This includes setting up fair and transparent methods for tip distribution.
  2. Implement Tracking Systems: Adopting technology solutions that track and distribute tips according to set criteria can help ensure compliance and transparency.
  3. Educate Employees: Conducting training sessions to educate staff about the new tipping rules will ensure everyone understands the changes and how they will be implemented.
  4. Enhance Record-Keeping: Robust systems for documenting tip distributions are essential. These records must be accurate, up-to-date, and readily available for inspection.
  5. Customer Communication: Informing customers about how tips are handled can enhance transparency and maintain trust. This can be achieved through notices on menus or at points of sale.
  6. Conduct Regular Audits: Routine audits are crucial to ensure ongoing compliance with the Act. These audits can help identify any areas of non-compliance and allow for timely corrections.

 

How Beavis Morgan Can Assist

Understanding and implementing the new rules can be challenging. Beavis Morgan is here to help your business navigate these changes smoothly. Our team of experts can assist you in reviewing your current practices, updating your policies, and ensuring that your business remains compliant with the new regulations.

We offer guidance on setting up compliant systems for managing and distributing tips, conducting employee training, and maintaining proper records. Our advisory services are designed to protect your business from potential penalties while fostering a transparent and fair working environment.

 

For detailed advice on adapting to the Employment (Allocation of Tips) Act 2023 or any other business concerns, please contact your usual Beavis Morgan partner or email info@beavismorgan.com. Our dedicated professionals are ready to support your business through these changes.