Employment Law Update - Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023 came into force on the 1st of October 2024 and is aimed at improving fairness for staff by ensuring that tips that customers leave are going to the staff as intended.

Whilst it may seem that this new legislation only applies to the hospitality sector where tipping practices are an everyday occurrence, the drafting of the legislation makes it clear that the Act extends to almost all areas of employment.

The Act imposes a duty on the employer to ensure tips are collected in and allocated fairly amongst all employees/ workers without taking a cut for themselves. In accordance with the Act, a tip is anything which has a fixed value expressed in monetary terms and is capable of being exchanged for money, goods or services. With more and more dental practices receiving gratuities such as gift cards, employers must now ensure they are allocated and distributing these fairly.  The law states that the employer should have a clear and objective set of factors which should be fair and reasonable when assessing how to distribute the tips fairly.

The law states that unfair allocation of tips could now result in indirect discrimination, if some staff receive a larger proportion than others. The Employer would also have to fail to evidence a fair and reasonable procedure when deciding the proportions allocated to each staff member. Employers are encouraged to discuss how they intend to allocate tips with staff before doing so to avoid any accidental discrimination.

Finally, the employment law definition of ‘wages’ has also been amended to specifically include “qualifying tips, gratuities and services charges allocated to the worker”. Therefore, it is likely that failure to give employees their fair proportion of tips could now give rise to a claim for unlawful deduction from wages.

The new duty on employers to allocate tips fairly should be observed carefully, and if employers have any doubt about whether their current allocation methods are “fair and reasonable”, they are encouraged to discuss this with a member of our Employment and HR team.

You can contact us on 0330 088 2275 or info@buxtoncoates.com .