What’s it about?

  • 100% of tips received by an employer (or received by the worker when the employer has control over tips) must be given to workers without deduction (except for deductions required by law, like tax).
  • The tips must be paid to the worker no later than the end of the month following the month in which the tip was paid.
  • You must have a written policy explaining how the tips will be allocated.
  • You must maintain records on how tips have been handled for at least three years and workers will have the right to request this information (employers have four weeks to respond).

It’s important to note that the legislation doesn’t define what ‘fair allocation’ will look like, so the government have made a draft Code of Practice available which sets out how tips should be distributed to make sure businesses are staying transparent and compliant with the new legislation.

What could happen if you aren’t compliant?

Quite simply, you could face substantial financial consequences, with awards of up to £5,000 per employee to reflect their losses.

Here’s what Director of Employment Law Gillian McAteer at our sister company Citation has to say about the new guidance: “We’re still waiting for the government to publish their response to the consultation on the draft Code of Practice published back in December, but it seems clear that these rules aren’t intended to be prescriptive – but rather set out ‘overarching principles’ on fairness for employers.

‘Fairness’ doesn’t necessarily mean all workers get the same proportion of tips, as there might be legitimate reasons why an employer chooses to allocate different portions to different workers, but it’s vital for employers to have a written policy on how tips should be allocated, based on a clear and objective set of factors like type of role, level of responsibility and customer intention.

Discrimination when allocating tips

Gillian McAteer goes on to say “The draft Code warns against discriminating when selecting and applying factors, and recommends consulting with workers to seek ‘broad agreement’ on their policy. We hope the government will publish the final Code as soon as possible, along with more detailed, non-statutory guidance to further help employers implement the new rules.”

Wondering where to go for advice?

Food Alert are part of something bigger – and our sister company Citation are able to offer complete HR support and guidance. If you’re interested in further HR support, you can contact Citation here or speak to your Food Alert consultant, who will be happy to refer you to Citation’s HR service. Plus, as a Food Alert client, you’re entitled to 10% off Citation’s HR services!


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