The new code relates to the Employment (Allocation of Tips) Act 2023, which received Royal Assent back in May and will make it unlawful for businesses to hold back service charges from their employees, ensuring staff receive the tips they have earned.
As outlined in the code, the determining factor in whether a tip is qualifying or not is whether the employer receives (in the case of employer-received tips) or exercises control or significant influence over (in the case of worker-received tips) the distribution of tips.
For example, if a worker receives and keeps a cash tip, with no employer control or involvement, the tip is out of scope for the Tipping Act and the code.
The code states that allocating and distributing tips fairly does not necessarily require employers to allocate the same proportion of tips to all workers, and that there may be legitimate reasons why employers choose to allocate different workers different proportions of tips.
Employers should use a clear and objective set of factors to determine the allocation and distribution of tips, adding that the choice of factors should be fair and reasonable given the circumstances and the nature of the individual businesses.
There are several factors that may be considered by employers when setting up their tipping policy, including considerations such as type of role, performance, length of time served and customer intention.
Employers should consult with workers to seek broad agreement in the workplace that the system of allocation of tips is fair, reasonable and clear and must maintain a written policy on how tips are dealt with at their place of business, ensuring this policy is made available to all their workers.
An employer may receive the tips directly and then pay workers their share of the tips as part of the next payroll cycle, and a tronc system can be used to distribute tips fairly and transparently.
Responding to the publication of the draft code, UKHospitality chief executive Kate Nicholls said: “The code of practice has been much anticipated and it's positive that it has finally been published so that the sector can provide feedback and begin to plan.
“On initial reading, we're pleased that the code of practice recognises the variety of different business models within hospitality and that the code of practice is not too prescriptive, allowing tips to be based on the circumstances of a role, for example.
“We'll be working closely with the Department of Business and Trade to provide feedback from members and ensure the final date of implementation allows businesses ample time to digest and implement the requirement under the code of practice.”
More guidance on how the overall legislation will operate, alongside the code of practice, is expected soon.
The code applies to England, Scotland and Wales and the Government has said it will be reviewed periodically to ensure it remains up to date’.
A consultation on the draft code has been launched and will be open for responses until 22 February 2024.
To view the draft code in full, click here. To respond to the consultation, click here.
