Employment (Allocation of Tips) Act 2023

Overview of the Act

1. The purpose of the Employment (Allocation of Tips) Act 2023 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 also requires employers to ensure that the distribution of qualifying tips between workers is fair.
2. The desired outcome of the Act is to improve fairness for workers by ensuring that the tips consumers leave in recognition of good service and hard work are going to the workers as intended. The Act also aims to increase fairness for employers who already allocate all tips to workers by ensuring that all employers follow the same rules and by preventing a return to unfair tipping practices in the future.
3. The Act requires employers to have regard to a statutory code of practice ("the Code") when complying with their obligation to allocate tips fairly. The Code, which is being developed with the assistance of stakeholders representing employers and workers, will set out the principles of fairness and transparency, reflecting (as far as reasonably possible) the multitude of ways that tips are reasonably collected by employers and received by workers.
4. The Act also addresses the enforcement of these new legal obligations by creating remedies to be made available to the Employment Tribunal in cases where employers fail to comply. These include allowing tribunals to order the employer to revise the allocation of tips or to order an employer to make a payment to one or more workers.
5. In order to allow workers sufficient information to take a claim to an Employment Tribunal, employers in a place of business where qualifying tips are paid on more than an occasional and exceptional basis are required to make available to workers a written policy setting out how tips are dealt with in that place of business. An employer’s policy must include how tips are allocated between workers. Upon request, employers are also required to share records of the qualifying tips which they have received and the amount of those tips which have been allocated to the requesting worker(s).
6. Where an employer does not receive or exercise control or significant influence over tips, including where tips are paid directly to workers in cash and kept or informally pooled by workers, the Act does not interfere with existing tipping practices.