The Employment (Allocation of Tips) Act 2023 : Part 1 – An Outline

The categories of payments covered by the Act are “tips, gratuities and service charges”, though reference to all categories as “tips” is adopted in this article.

Payments will qualify for distribution under the Act if they are received by:

• the employer (“employer-received tips”), or
• the worker (“worker-received tips”),
  • provided they are subject to the employer’s exercise of control or significant influence over the allocation of the tip.

Employers must ensure that the total amount in tips paid by customers at, or otherwise attributable to, their place of business – by which it means any location where the activities of the employer’s business are carried out on a permanent or temporary basis – Is allocated fairly between workers at that place of business.

The Act also makes a distinction between a “public place of business” (where interaction of customers and workers of the employer is wholly or mainly face-to-face) and a “non-public place of business”. Employers with a non-public place of business will be required to fairly allocate those tips between workers at both the non-public and public place of business, if they have one or more public place of business.

Additional provision is included in the legislation to allow the employer to make arrangements for an “independent tronc operator” to allocate part or all of the tips, provided the arrangements are “fair”. To be compliant with the legislation, the employer must, amongst other things, reasonably consider the independent tronc operator to be operating, or intending to operate, arrangements independently of the employer.

Agency workers who are not otherwise workers of the employer are to be treated as if they were; and in those cases, payment may instead be made to the agent, who must in turn pay the agency worker within the timescale applicable to workers.

Payment of allocated tips must be made no later than the end of the month following the month in which the tip was paid by the customer.

Fairness is not defined in the legislation, however the Secretary of State is to issue a code of practice on the allocation of qualifying tips to promote fairness and transparency in their distribution. Employers are to have regard to the code when allocating and paying tips.

A draft code for consultation is awaited, upon which employers can base consideration of how best to tailor their policies to fit the dynamics of their business.