A new law which ensures workers keep all tips from customers has come into force. The Employment (Allocation of Tips) Act 2023, which came into effect on 1 October 2024, enforces the distribution of 100% of tips and service fees to the employee.
The law is designed to protect employees and ensure that they are paid 100% of any tips or gratuities they receive. If companies break the law and retain tips, employees will be able to bring claims to an employment tribunal.
The law makes it illegal for companies to withhold tips from employees - whether in cash or by card - and is expected to benefit more than three million service workers in the UK leisure and hospitality sector.
The new law will cover employees in restaurants, cafes, bars, hotels and pubs as well as hairdressers, delivery drivers and taxi drivers.
Employers must have a written policy in place surrounding tips and are also now required to keep records of how tips have been managed and distributed.
Under the new law, all tips must be passed to employees by the end of the following month from when they were received. Tips must be applied to payslips and as was the law previously, workers will still need to pay tax and national insurance on their tips.
If you are a business owner in the leisure and tourism industry and need support or advice on how this new legislation may affect your business or impact on payroll matters, please get in touch with our team today.
