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What are legal and practical ramifications of UK Tipping Act 2024? 

In light of long-standing concerns around employers failing to pass on 100% of tips or making deductions before passing these on, the UK Tipping Act 2024 has been implemented in an effort to address this issue.

Employers will be required to pass all tips, service charges and gratuity paid on or after 1 October 2024 to employees without making any deductions (save for deductions required by law such as tax and National Insurance Contributions). It should be noted that this obligation relates only to “qualifying tips” being those tips which an employer receives directly from the customer i.e. those paid with credit or debit card, paid into the employer’s bank account or through another electronic method such as through a mobile app.

Where an employee receives tips directly from a customer (i.e. cash tips), these will not be deemed to be a qualifying tip unless their employer has significant influence or control over how those tips are distributed.

Whilst employers can allocate different proportions of tips across their workforce, should they do so, they must ensure they are doing this fairly and objectively.

If employers fail to comply with this obligation, employees will now be able to commence a claim within the Employment Tribunal within 12 months of the date their employer failed to comply – significantly longer than the time period for other employment related claims.

What should employers be doing?

  • Employers will be required to have an accessible policy on tips which details how tips will be allocated fairly
    • Such a policy should be made available to all staff, irrespective of whether they are employed or engaged by them directly or through an agency
      • Payment of tips must be made no later than the following month in which a customer paid the tip i.e. if a customer pays a tip in month 1, payment of the tip to the employee must be paid no later than the end of month 2
        • Keep records of how tips have been allocated for a three-year period from the date they were paid to the employee
          • Ensuring managers and team leaders are informed of the new requirements and ensure they are actively keeping a record of any tips that are paid and how these are allocated
            • Employers should be planning how they intend to split tips and obtain employees agreement as to the proposed split to ensure fairness

              • Even if employers are already passing tips on to employees, they are still required under the UK Tipping Act 2024 to take action and maintain accurate records. It is expected that for those who already operate fair practices when it comes to allocating tips, there will be limited additional steps to take in order to comply with this new obligation.

              Should an employee commence a claim, a tribunal can order an employer to pay compensation of up to £5,000 per worker for financial loss following a breach of their obligations. The new legislation may also result in claims for unlawful deduction of wages as “tips” are now seen to be incorporated into the definition of wages.  Given the financial reach of a claim can become significant, employers should ensure that they are not falling foul and breaching their obligation.

              As the Labour government have indicated that they feel more needs to be done in protecting hospitality staff, we anticipate that further changes to the laws on tipping will be made in due course.

              Our Employment Team at Lupton Fawcett LLP is a multi-awarded team which can give specialist advice on any employment matter affecting you or your business. If you would like some advice on any issues raised in this article or generally  please do not hesitate to get in contact with a member of our Team who will be able to advise you on  0333 323 5292 or law@luptonfawcett.law

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