New law in force today requires employers to give 100% of tips to staff

1. Pass on all tips and service charges to workers without deductions, except in very limited situations, such as deduction of income tax. You can't make any deductions by way of bank, payroll, administrative charges, etc. Tips must also be paid to agency workers working in the business
2. Ensure that tips are distributed in a fair and transparent manner which involves you taking control (or exerting significant influence) over how they are distributed
3. Have a written policy available to staff which explains how you will distribute tips to your workforce which complies with the new law and Code of Practice
4. Maintain detailed records of all qualifying tips etc paid over a three-year period; and
5. Respond to any requests made by your staff about the amounts of tips received and the portion allocated to them.

Code of Practice

The government has published statutory guidance on distributing tips fairly which explains the new law. Tribunals have a duty to take the Code into account when determining disputes about tipping practices. It is, therefore, essential that you know your way around the Code and design and implement a tipping policy that complies with it. 

The Code doesn't set out an exhaustive list of factors you have to consider. Instead, it provides overarching principles on what fairness and transparency mean and options about how to allocate and distribute tips. You can read our overview here.

The government has said that it will publish further non-statutory guidance ‘in due course’ to accompany the code and help employers and workers interpret the new legislation.

Need a policy?

These new laws primarly impact the hospitality, leisure and services sectors. We can help you comply with the new duty by drafting a policy tailored to your particular business. Please speak to Gordon Rodham for more information.

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