Update September 2024
The Employment (Allocation of Tips) Act 2023 (the Tips Act) and its accompanying statutory Code of Practice will come into force on 1st October 2024. This was confirmed by commencement regulations for the Act and Code of Practice which were laid before Parliament in July.
The Code recommends consultation with workers in advance about a tips policy. This is not a legal requirement but may help with employee buy-in to the new approach. If this seems sensible, you should prioritise putting together a draft tipping policy and consulting employees on it now, before the Tips Act comes into force on 1st October.
Update July 2024
The Government has confirmed that the Employment (Allocation of Tips) Act 2023 will now come into force on 1st October 2024 rather than 1st July 2024 as originally proposed.
Under the Act, employers are required to pass tips on to workers, and employers of businesses where tips are left more than occasionally are required to have a tipping policy in place. Workers will also have a new right to request a copy of their tipping record and will therefore be able to bring a claim if they’re not receiving tips they should be.
Employers will also be required to have regard to a new statutory Code of Practice when distributing tips. The final draft version of this new statutory Code has also now been published and can be accessed here.
Even though the Employment (Allocation of Tips) Act 2023 has not yet been enacted (it’s expected to come into force in October 2024), it’s already making waves in the hospitality industry.
Why? Because, under the Act, employers will have to ensure that all qualifying tips are ‘allocated fairly’ to workers, including agency workers. Alternatively, they may pay the tips over to an ‘independent tronc operator’ who will allocate it themselves.
Both scenarios present a cost to employers — either by increasing their administrative burden — if they attempt to sort out the fair allocation themselves — or added fees to engage the services of a tronc operator to do it for them.
According to City AM, the London restaurant chain Ping Pong is trialling a novel way of working around this issue – by increasing pay to the amount they believe workers would have received in tips. If other hospitality businesses follow their lead – and choose to increase wages rather than grapple with the need to allocate tips ‘fairly’ – then we may be heading for the end of tipping as we know it.
What’s changing in Ping Pong’s model?
- It will no longer allow customers to tip by card, although they will still be able to pay tips in cash.
- An optional service charge of 12.5% (90% of which was allocated to staff) will no longer be applied to customer bills. Instead, the restaurant will charge an optional ‘brand fee’ of 15% which will go towards franchise fees and other brand-related expenditure.
- Wages will increase by 19% to a minimum of £12.44 per hour, which the restaurant believes will match the earnings staff would have received by tip allocation.
At the moment, this is just a trial and does not stop customers from leaving cash tips. But cash tipping is in decline, accelerated by the move away from using cash for payment during the pandemic. People don’t tend to carry cash with them anymore. It will be interesting to see how this trial progresses and whether other hospitality businesses follow suit.
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