The Employment (Allocation of Tips) Act introduced today requires employers to pass all tips, gratuities and service charges onto staff without income tax deductions.
While most businesses give tips to their employees, the change of law was passed to prevent the minority from adopting “unacceptable tipping prices”, according to the Department for Business and Trade (DBT).
The new law, which is applicable to all workplaces, means employees need to have a written policy on how tips are dealt with and ensure there is a record of all tips, which have to be paid within one calendar month.
Those jobs most likely to benefit from the change include the three million hospitality employees who work in cafes, bars and restaurants, who can now ask for a record of their establishment’s tipping history for the length of time they have worked there.
If an employer does not adhere to the new fairer distribution rules, then workers can bring a claim to an employment tribunal.
Non-complying companies could be hit with fines or told to pay compensation to staff.
‘Tips can be trusted for the first time’
Ben Thomas, CEO of tipping platform TiPJAR, said: “Our hospitality and service industries are powered by a wonderfully diverse and exceptionally talented workforce. For the first time, these millions of workers can trust that tips employers collect on their behalf will always be passed to them.
“As a business providing a platform to get tips to workers quickly, fairly and transparently, we wholeheartedly welcome today’s announcement.
“We look forward to continuing our work with the DBT and Government to develop further guidance as the principles of the legislation are put into practice, supporting businesses across the sector to operate to a consistent and equitable standard in handling tips.”
The law comes ahead of the Employment Rights Bill that will be heard in Parliament on 12 October, which hopes to strengthen workers’ rights. It was a policy announced in the King’s Speech in July after the Labour Party won the election.
Justin Madders, minister for employment rights, added: “When you tip someone for good service, you expect them to keep all their tip. They did the work – they deserve the reward.
“This is just the first step of many in protecting workers and placing them at the heart of our economy. We will be introducing further measures on tipping to ensure workers get their fair share of tips.
“Britain’s outdated employment laws require an urgent update. This Government will ensure they are fit for the modern economy and deliver on our plan to make work pay.”
