New regulations will bring tips law and Code of Practice into force from 1 October 2024

The Government has now published the Employment (Allocation of Tips) Act 2023 (Commencement No2) Regulations 2024 which will bring the new law on tips into force from 1 October 2024.

In addition, regulations have been made to bring the new statutory Code of Practice on Fair and Transparent Distribution of Tips into force, also from 1 October 2024.

Once in force all qualifying tips will need to be fairly allocated to staff, including agency workers. Qualifying tips include both those that are employer-received and worker-received tips that are subject to the employer’s control.

The Code of Practice on tips sets out certain principles on fairness and transparency and explains how employers should apply these principles in their places of business. It will be for each individual employer to determine which specific principles best apply to their business, but employers should use a clear and objective set of factors to determine the allocation and distribution. 

Employers should consult with workers to seek broad agreement in the workplace about how tips will be allocated and ensure that qualifying tips are paid to workers no later than the end of the month following the month in which the tip was paid by the customer.

Employers must also have a written policy in place which explains whether the employer requires or encourages customers to pay tips and how the employer ensures that all qualifying tips paid at, or otherwise attributable to, the place of business are dealt with. This should include information about how the employer allocates tips between workers.

In 2009, it became illegal for employers to use tips to make up a worker’s entitlement to National Minimum Wage. That year, the Government also issued a voluntary Code of Best Practice, which set out how employers should process tips in a fair and transparent manner. Because bad practice persisted from some employers, the Government supported the passage of the Employment (Allocation of Tips) Act 2023, and the creation of a new Code of Practice with legal effect.

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