Own a restaurant or pub? Here’s what the Employment (Allocation of Tips) Act 2023 means for you

Today sees the commencement of new legislation, the Employment (Allocation of Tips) Act 2023 (the Act).

The overview of the Act states "the purpose is to create a legal obligation on employers across sectors to allocate all tips, gratuities and service charges which they are paid or which they exercise control or significant influence over ("qualifying tips") to workers without any deductions."

The Act requires you (amongst others things) to:

1. Have a written tipping policy.  This should include; how tips are accepted, allocated and distributed, and what steps you take to ensure they are handled fairly and transparently.
2. Allocate tips fairly amongst workers.  This includes eligible agency workers.  It doesn't mean you have to allocate the same proportion to all, but you must give consideration to all staff involved in providing the service to your customers.
3. Be clear and objective when determining the allocation of tips.  The choice of factors should be fair and reasonable within the circumstances and the nature of your business.
4. Distribute tips to staff in a timely manner.  At the latest, by the end of the month following the month in which they have paid.
5. Keep clear records (for at least three years) of how tips are dealt with, which includes details of the amount of all tips received at a given place of business and the amount allocated to workers individually and collectively.
6. Provide copies of certain records to workers on request.

The Act covers two categories of tips.

“Employer-received tip”: a tip which is paid to the employer (or an associated person), normally using a credit or debit card or paid into the account of a third-party entity under an agreement with the employer.

All employer-received tips must be distributed in accordance with the Act.  Tronc systems which collect tips from customers and divide and distribute them to workers in line with the employer's instructions are included here.

“Worker-received tip”: a tip paid by the customer directly to the worker and not to the employer or their associated person.  Usually paid in cash and does not have to be distributed in accordance with the Act unless it is subject to the employer's control or connected with any other worker-received tips that are subject to the employer's control.  Tips are subject to the employer's control if, for example, there is a requirement or pressure to share cash tips with other workers.

In essence, every tip paid whether by cash or card is covered by the Act unless it is passed directly to the worker by the customer and your policies allow that worker to keep it in full.

Transparency is very much the key here and likely to ensure that there are no issues or complaints raised by workers.

Creating and implementing transparent policies and procedures in line with the above is necessary for you to ensure your compliance.  We can help with this.  Contact us below to arrange a call back.