What does the Employment (Allocation of Tips) Act 2023 mean for payroll?
Posted on 16th August 2023
The Employment (Allocation of Tips) Act 2023 is set to introduce pivotal changes to the hospitality sector.
With Royal Assent granted earlier this year, and implementation slated for 2024, this law modifies the norms of allocating and paying tips, gratuities, and service charges, aiming to foster fairness and transparency.
Hospitality businesses should be familiar with these modifications and their potential impact on payroll administration.
Deciphering the legislation
The Act is applicable to both public and non-public places of business. A public place of business is one where customers and workers interact directly. Non-public places of business, conversely, are places where workers receive tips, gratuities, and service charges due to the employer operating one or more public places of business.
The Act extends to cover not just employees, but also agency workers. It governs the distribution and payment of tips, gratuities, and service charges handled via a tronc, which is a separate organised system to manage and distribute these payments.
The Act entitles workers to receive qualifying tips, gratuities, and service charges. Employers have a responsibility to ensure fair allocation and prompt payment to all workers, within a month following the customer's payment.
If qualifying tips, gratuities, or service charges are paid regularly, employers must establish a written policy outlining how they are managed. This policy, including any amendments, must be readily available to all employees.
Record keeping and adherence
Employers are obliged to maintain records of every qualifying tip, gratuity, and service charge paid, for a period of three years from the date of payment.
Employees or workers can submit a written request for these records once in every three months. Employers should provide the records promptly, without contravening data protection laws.
Enforcement and sanctions
Non-compliant employers or agents may face employee complaints lodged with an employment tribunal. Complaints can arise from an employer or agent's failure to meet the payment obligations, or an employer's failure to uphold written policy and record-keeping obligations.
If an employment tribunal rules in favour of the worker, the employer or agent may be ordered to pay a sum not exceeding £5,000, as compensation for any financial loss.
The Employment (Allocation of Tips) Act 2023 will significantly alter the management of tips, gratuities, and service charges in the hospitality sector.
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