In May 2023, the UK Government made important changes to how tips, gratuities, and service charges are handled in the hospitality industry. These changes are part of the Tipping Act, an update to the Employment Rights Act 1996. The goal is to make sure tips are shared fairly among staff. Originally set to start in July this year, the new rules will now take effect on October 1 2024. Here’s what you need to know.
Why the New Tipping Law?
The main purpose of the Tipping Act is to ensure that all tips go directly to the service staff who earn them. In the past, businesses could decide how to divide tips, even keeping some to cover costs like pensions. The new rules stop this, requiring all tips to be given to employees. This doesn’t mean everyone gets an equal share, but the distribution must be fair.
Key Changes Under the Tipping Act
Full Allocation to Staff
Now, 100% of tips and service charges must go to the staff. Employers can’t deduct fees for admin, card transactions, or other costs.
Timely Distribution
Tips must be paid in full to employees by the end of the next calendar month after they are received. This ensures staff get their tips quickly.
Immediate Implementation
The law takes effect on 1 October 2024, with no transition period. Businesses must comply by this date to avoid legal issues.
Fair Allocation of Tips
The Tipping Act requires tips to be distributed fairly among employees. To help with this, a Code of Practice has been created. This guide provides general principles on fairness but leaves it up to each employer to decide how to apply these principles.
Right now, only 28% of businesses are following the new rules. This means many businesses need to update their policies to meet the requirements of the Tipping Act. This includes reviewing current tip distribution practices, updating policies, and educating staff about the changes. By doing this, businesses can avoid legal problems and create a fairer workplace.
To find out how our solutions at MCR Systems can help you manage tips, please get in touch with our team here.