What Is The Tipping Code Of Practice?

mariam-abu-hussein
Mariam Abu HusseinLegal Assessment Specialist @ Lawhive
Updated on 19th December 2023

The government is taking steps to make sure that tips go to the hardworking staff who deserve them. They’ve created a law called the Employment (Allocation of Tips) Act 2023 to make sure that tips are given to workers in full, with very few exceptions. As a result, businesses will need to have a clear policy about tips, and share records of how tips are shared out, and workers should have the right to request this information. 

tipping-code-of-practice

To make sure everyone understands how this works, the government has put together a set of guidelines to help businesses and workers follow the new law about fair and transparent distribution of tips.

The government wants input from workers, employers, and everyone involved in tipping industries to make sure these rules are practical and fair. This is part of their efforts to protect worker’s rights and make the UK the best place for businesses to thrive. 

What is the Tipping Act?

The Tipping Act is a new law that says employers must follow certain rules when it comes to tips and service charges. These rules include: 

  • Giving all tips to workers without taking anything away, except for things like income tax;

  • Making sure tips are shared fairly and openly when the employer is in control of how they’re given; 

  • Following a Code of Practice on fairness and transparency when dealing with tips;

  • Having a written policy on how tips are handled, and making this policy available to all workers; 

  • Keeping a record of all tips, how they’re shared among workers, and letting workers see this information if they ask. 

The Tipping Act says qualifying tips, gratuities, and service charges are tips that the employer gets or tips that workers get but are under the control of the employer. For example, if an employer dictates how tips are distributed or if tips are distributed at the end of a shift or as part of the regular payroll. 

Who does the Tipping Act apply to?

The Tipping Act covers all workers. However, if you’re self-employed, these rules don’t apply to you. 

Employers should be fair when dividing tips among workers, even if there are different types of workers like full-time, part-time, or temporary staff. To make things fair, employers should make sure that everyone working at the establishment knows and can easily access all the workplace policies, including tipping policies. 

The Tipping Code of Practice

The Tipping Code of Practice gives more details on how tips should be distributed in places like restaurants and other industries where tips are common. It covers things like how to collect and share tips, what to consider when sharing them, and the importance of being clear about tipping policies. 

At present, the government is asking for opinions on a draft Code of Practice. This is a chance for everyone to get involved and share their thoughts on these guidelines. The government will listen to these opinions before finalising the rules, which are expected to come into effect in July 2024. 

Below, we’ll cover some of the key points in the draft Code of Practice as it is today.

Fairness with tips

Being fair with tips is the main steer of the Tipping Act and subsequent Code of Practice. Employers need to stick to key principles, and if disagreements arise, employment tribunals should be used to determine if the employer followed the law. 

When deciding how to divide tips among workers, employers have some flexibility, but they should use clear and fair factors. These could include the type of work, basic pay, performance, seniority, time with the employer, and customer intentions. 

It’s essential to avoid any form of discrimination when sharing tips. Employers must be cautious to prevent unfair treatment, especially if it affects a group of workers with specific protected characteristics. To ensure fairness, employers should discuss and agree on a system with their workers, and this agreement should be documented in the tipping possible. 

Regular reviews of the approach to sharing tips are advisable, particularly when there are changes in staff or the organisation. This helps to keep the system fair and up to date.

Tip allocation and distribution

Employers can directly receive tips and then include workers’ shares in the next payroll cycle, or employers may use a tronc. A tronc allows for various arrangements, such as appointing a staff member or an independent tronc operator, who can be an external firm or a staff member elected by workers. What’s most important is that the tronc operator is independent. 

If an employer appoints an independent tronc operator, the employer’s instructions must align with the fairness principles. If the employer believes the tronc is operating independently and fairly, they comply with the Code of Practice. However, if the employer becomes aware of unfair practices, they must address the situation promptly to maintain fair tip allocation. 

The Tipping Act also specifies that employers must distribute all tips to staff by the end of the month following the month in which customers paid the tips. 

Transparency in how tips are allocated and paid

Employers have to have a written tipping policy when qualifying tips are paid at or are otherwise attributable to a place of business on more than an occasional and exceptional basis. This policy should cover how tips are accepted, how they are allocated and distributed, and the steps taken to ensure fair and transparent handling. 

Employers must ensure that workers are aware of their entitlements. This is important for workers to challenge the policy or its implementation if they find it unfair. The written policy can be given electronically or as a written document, as long as all staff have equal access and it is written in plain language. Accessible formats must also be provided for workers with disabilities upon request. 

When engaging with agency workers, employers can either provide the tipping policy directly or have the agency share it on their behalf. Physical copies may be provided during company inductions to make sure agency workers are not disadvantaged. Employees can also share the policy with customers, or display it publicly, although this is not a requirement. 

Employers must also maintain a tipping record detailing all qualifying tips received and amounts allocated to each worker. They should keep these records for three years. Workers have the right to request and view this record once every three months. The tipping record must comply with data protection legislation, providing transparency without revealing specific amounts paid to other workers.

Addressing problems with tips

Employers should establish fair processes to address and resolve issues and queries from workers who may not have received their expected share of tips. Queries from agency workers should be treated with equal importance as those from directly employed staff. 

In cases where internal processes fail to resolve issues with tips, workers can contact ACAS initially where a conciliation officer will then attempt to resolve the issue and facilitate a settlement between the parties involved. The Tipping Act empowers workers, including agency workers, to enforce their rights through the employment tribunal system. 

Should the employment tribunal find a complaint about the fairness or transparency in tipping well-founded, it has the authority to: 

  • Make a public declaration to that effect; 

  • Order the employer to revise a previous allocation of tips; 

  • Make a non-binding recommendation on a previous allocation of tips; 

  • Instruct the employer to compensate the affected worker or workers. 

If an employer is instructed to compensate the affected worker or workers, this compensation may extend to other workers at the relevant place of business who did not file a complaint with the tribunal. 

It is expected that more details about the employment tribunal process relating to tipping will provided in further non-statutory guidance. 

Conclusion 

As of today, the tipping code of practice can be seen in full in draft form. It is expected that the new tipping code of practice will come into effect on 1st July 2024 to provide enough time for businesses to understand and implement it following the law. Further guidance will also be published to accompany the final code of practice. 

At Lawhive, our employment solicitors can provide expert legal advice and guidance on employment issues, including those discussed above. 

Get in touch with us today for a free case assessment and personalised guidance from our dedicated legal assessment team, whether you’re an employer looking to develop tipping policies aligned with the code of practice or an employee looking to take action against their employer.

We’re here to make sure your rights are upheld and support businesses to ensure their workplace is fair and just for everyone. 

Share on:

Get legal help the hassle-free way

We have expert solicitors ready to resolve any type of legal issue in the UK.

Remove the uncertainty and hassle by letting our solicitors do the heavy lifting for you.

Get Legal Help

Takes less than 5 mins

We pride ourselves on helping consumers and small businesses get greater access to their legal rights.

Lawhive Ltd is not a law firm and does not provide any legal advice. Lawhive Ltd uses a network of licensed solicitors to provide legal work directly to clients through our online platform. Please read our Terms for more information.

Our network includes our affiliate company, Lawhive Legal Ltd. Lawhive Legal Ltd is authorised and regulated by the Solicitors Regulation Authority with ID number 8003766 and is a company registered in England & Wales, Company No. 14651095.

Lawhive Legal Ltd is a separate company from Lawhive Ltd.

© 2024 Lawhive
86-90 Paul Street, London EC2A 4NE

Version: fcfad05