EMPLOYMENT (ALLOCATION OF TIPS) ACT 2023

As a business RWRD has been involved in supporting the hospitality industry since 2018 when the company launched into the market with a technology platform to help independent outlets better engage with the local community.

RWRD TipBox has been closely following this Act since it received Royal Assent on 2 May 2023. The changes within the act apply to all businesses within England, Scotland and Wales.

RWRD have worked closely with leading Employment Law specialists Hill Dickson LLP to analyse the implications of the new legislation on hospitality businesses.

READ THE LEGISLATION

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WHAT ARE THE KEY CHANGES?

NO DEDUCTIONS

The full amount paid by a customer by way of tip, gratuity or service charge must be paid to the workers. The only deductions that are not prohibited are statutory deductions (in the case of a tip this is personal income tax). Businesses cannot deduct any transaction fees.

3 YEARS OF RECORDS

It is now a duty for businesses to maintain 3 years of records. These records should include tips collected and how the tips have been distributed for the place of business.

PAYOUT WITHIN 1 MONTH

Business must ensure that the total amount of tips collected is distributed within 1 month of the tip being left by the customer.

FAIR ALLOCATION

A business must follow the Statutory Code of Practice in determining what would be a fair allocation of tips. The allocation of tips based on hours worked is deemed a fair allocation.

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DEDUCTIONS ARE PROHIBITED

100% of the amount paid by a customer by way of tip, gratuity or service charge must be paid out to workers. A business cannot deduct any card fees, payment processing fees or handling charges.

This specific point was discussed in the House of Commons on 20th January 2023 by David Johnston MP, on the topic he was "not sympathetic to that particular point.” in regards to businesses having to cover the fees for tips, gratuities and service charges.

On 3rd March 2024 Lord Mitchell raised the issues of credit card fees again during the consultation, this did not result in any amendments to the legislation.

Therefore, any tips that are taken on card must be allocated without any deductions for the cost of the transaction, it is up to the business to make up the deficit if fees are incurred on transactions.