The Tipping Bill has received Royal Assent and will be in force in 2024. It will require employers to ensure all tips and service charges are allocated fairly between its workers. The commencement date for the Employment (Allocation of Tips) Act 2023 has not yet been announced but, according to the government’s website, they say it will be at some point next year after a consultation on a statutory code of practice that will sit alongside the legislation. More on that in a moment.
The new duty on employers will be to ensure that tips and service charges are allocated fairly between workers. ‘Fairly’ isn’t defined but, no doubt, the Code of Practice will help with that.
Notably, the Act says the employer will be required to have a written policy on how it deals with tips. It’s the first time we’ve seen an express statutory requirement for employers to have a written policy on something which shows just how important that policy will be.
Workers will have the right to bring claims in the tribunal if their rights are breached. The limitation period for that is generous - 12-months, rather than the usual 3. Also, tribunals will have the power to force employers to revise their tip allocation policies where they see fit, and they’ll be able to order the employer to pay tips and services charges not just to the claimant, but to any workers employed by the employer.
So, let’s get a view on all of this, and how it will work in practice. Francis Keepfer advises clients in the hospitality sector and has been tracking this legislation closely and earlier he joined me by video-link to discuss it:
Francis Keepfer: “So, I think it's really important to basically draw the distinction out between gratuities and tips and service charges. So, gratuities and tips. So, if you imagine you go to a restaurant and you effectively give £10 to the waiter, to the worker there, that money is legally theirs and the employer cannot take that away from them. What we're talking about here is service charges. So, that’s money that you might see added to the end of a bill, for example, or on a hotel invoice. That's what we're talking about here, that’s what this new Tipping Bill concerns. It’s the money that goes directly to employers and that's the money that the government wants to change how employers are distributing amongst their workers.”
Joe Glavina: “That distribution needs to be fair but there’s no definition of what that means so, presumably, the Code will have to deal with that, when we get to see it.”
Francis Keepfer: “That's exactly right. So, you're right. The Bill says that employers are going to be required to distribute tips and gratuities and service charges fairly, but there's no definition at the moment of what fairly means. So, as you quite rightly point out, the government are going to be putting forward a new code of practice, in due course. Again, there's no timeline for that at present, but that’s going to be coming up for consultation in due course and, hopefully, that will give employers a little bit more guidance in terms of what ‘fairly’ means.”
Joe Glavina: “Moving onto record keeping Francis. Tell me about that.”
Francis Keepfer: “So, the record keeping requirements are going to require employers to have to keep records of their tipping practices for three years. Now, again, that's, that's quite interesting, particularly, I suppose, against the kind of current backdrop with the government trying to kind of cut red tape as much as possible. So, we've just had legislation, old European legislation, that is set to be repealed, which wasn't being implemented in the UK, in all honesty, about keeping records of employees clocking in and out of work. So, that has gone and that's one example of the government trying to cut red tape. On the other hand, this legislation is set to come in which is requiring employers to keep records. So, it's really, really quite interesting. I suppose from a practical perspective as well, employers are going to have to, potentially, change the way that they deal with record keeping generally. With the GDPR, for example, you employers are required to keep records of things for as long as long as necessary, so they might already have practices in place which mean that they get rid of records and information after a set period of time. We've now got this new legislation that says that employers have to keep records of tipping practices for three years. So, again, that's something that employers probably need to start thinking about now before this actually sort of passes into law.”
Joe Glavina: “Moving on to enforcement, Francis. So, a 12-month limitation period, not just 3 months but 12. Also, power to tribunals to compel employers to revise their tip allocation policies. Thoughts on that.”
Francis Keepfer: “Yes, two really interesting points. The enforcement provisions, again, are really interesting. As you point out, the first one is a 12, not a 3, month limitation period. So, for the vast majority of claims in the employment tribunal there's obviously a three-month limitation period but the policy decision has been taken to extend this to 12 months which obviously gives employees and workers a far greater period of time in which to bring claims. There's also, as you point out this, this power for the Tribunal to require employers to revise their policies, which again, is novel. We haven't really seen legislation before that requires employers to have policies and now, we've got, potentially, enforcement provisions which require them to change those policies. So, some really interesting enforcement points. There's also another interesting point in that tribunals are also going to have the power to award up to £5,000 in compensation for associated loss of earnings to workers and employees who say that they haven't been allocated tips and gratuities on a fair basis. The tribunals are also going to have the power to award tips and gratuities to all employees in one particular employer, rather than just the claimant. So, one claimant could effectively bring a claim on their own behalf and the result of that claim could be that tips and gratuities then have to be subsequently awarded to more employees than just the claimant. So, yes, some really interesting enforcement provisions and, yes, we'll keep an eye out to see how those are being enforced going forwards.”
Joe Glavina: “Final question Francis. Are there any action steps for HR right now?”
Francis Keepfer: “I think it probably is a little bit too early given that the code of practice is going to be consulted on, presumably employers will be asked to give their input into that, and other industry bodies. So, once that code of practice comes out, that will hopefully give employers a bit more guidance and will give them a bit more help, effectively, in knowing what needs to go into those policies, and what doesn't. But it's never too early to start thinking about what might be going in those policies and what those kinds of practices need to be and how employers can start getting ready for these new changes. So, I suppose my advice to employers would be to start thinking about this now, start taking practical steps and then, in terms of formalising everything and finalising everything, wait for the code of practice and then that should put employers in a good position going forwards.”
A reminder of the timetable for this. In its press release the government says: “We expect the measures to come into force around a year after Royal Assent” - so around May 2024 which gives the hospitality sector time to get ready. They go on: “The measures in the Act will be supported by a statutory Code of Practice. This Code is being developed and will be subject to formal consultation later this year.” Of course, when that consultation opens, and we see a draft of the code we’ll come back to this. Meanwhile, we’ve put a link to the Act, and the press release, in the transcript of this programme.
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