Tips and Service Charges for Workers

Posted on: 15/06/2023

Category: For you, For your business

A new law is coming into force which will allow workers to receive tips that would otherwise have been deducted by their employers.

The Employment (Allocation of Tips) Bill was passed into law in May and places new obligations on employers to exercise fairly the allocation of tips over which they have control. Such tips will need to be paid to workers in full, without deductions, within one month of the payment being made by a customer.

If tips are paid by customers relatively regularly as part of the business, then the employer will need to have a written policy (an unusual employment law-related requirement for an employer) which must be made available to all workers and must set out how the employer deals with tips.

A statutory code of practice is also going to be introduced and this will set out details on the fair and transparent distribution of qualifying tips. A failure to follow this code can be relied upon by a worker in an Employment Tribunal claim.

An employer must keep a record of all tips and service charges and their allocation for 3 years. A worker will have the right to request this information.

As far as enforcement of these claims is concerned, a worker will have a period of 12 months from any failure to comply (rather than the usual 3 months) to raise a claim with the Employment Tribunal. As well as making an award for back payment of these monies to the worker making the claim, it can also require the employer to make the payments to other workers so affected.

Tribunals can also require employers to change their tip allocation policies and if non-payment causes additional financial loss to the worker for example, bank charges and interest payments, an additional compensatory award of up to £5,000 may be made to a worker.