Since October 2024, under the Employment (Allocation of Tips) Act 2023, employers must pass 100 per cent of tips, including service charges and gratuities, to their staff. Employers are required to ensure that tips, gratuities, and service charges paid at their place of business are allocated fairly among all workers, including employees, agency workers, and casual workers on zero-hours contracts, regardless of their length of service. These payments must be made no later than the end of the month following the month in which the customer paid the tip, gratuity, or service charge. Employers must pass on these tips to workers without deductions, other than standard tax and National Insurance deductions. Your employer is also required to pay you the minimum wage, irrespective of the amount of tips you receive from customers. The Act applies to pubs, bars, cafes, restaurants, hair or beauty salons, and casinos.
Under the Act, a ‘tip’ or ‘gratuity’ is defined as a payment from a customer as thanks for good service. A ‘service charge’ occurs when a company adds an amount to the customer’s bill before they give it to the customer. A service charge can be either voluntary or compulsory. The terms of the Act apply to all tips and service charges that go directly to an employer, for example, a service charge added to a bill, and tips that go to the worker first but that the employer collects and divides between workers. This includes tips paid in cash, by card, or through digital payment methods, such as an app. However, the law doesn’t apply to tips you get directly from a customer and which you don’t give to your employer, for example, cash a customer leaves on a table that you keep.
Your employer doesn’t have to share the tips equally between workers. This is highly problematic because it allows employers considerable latitude in tip allocation. For example, they may choose to give a larger share of tips to long-serving workers, supervisory staff (such as head waiters), workers deemed to work harder or perform to higher standards, or a smaller share to workers against whom complaints have been made. This is hardly fair and can be used to divide the workforce. Under the Act, you have the right to complain if you believe the allocation is unfair. Wherever possible, such complaints should be made collectively by getting as many workers together as possible and submitting a joint complaint. You can contact us here at SFHWU for support and advice on how to do this.
By law, employers must have a written tipping policy. This policy should explain your employer’s approach to tips, including who is responsible for distributing them and how they will be shared. You also have the right to request access to your employer’s ‘tipping record’, which details all tips paid to staff over the past three years. Employers must ensure that all their workers can access their tips policy. If you are unsure where to find it, ask your employer. If you suspect your employer is breaching the law regarding tip distribution, where possible you should collectively request a copy of the policy. Always submit such requests in writing and retain copies.
Your employer cannot change their tipping policy without first consulting the workforce. In certain circumstances, an unconsulted change to the tipping policy may constitute a breach of your contract. If you feel your employer is not taking the consultation process seriously, or if you disagree with the changes being made, you should challenge them.
If your employer does not have a written tipping policy, refuses to make it available to you, fails to keep a record of tips received, or fails to make those records available, you can take your employer to a tribunal. This applies whether you are an employee, an agency worker, or a casual worker. You have 3 months minus 1 day to make a claim, commencing from the date the employer failed to provide a policy or records.
Similarly, if your employer fails to pass on tips, you can make a claim to an employment tribunal. You will have 12 months to do so, starting from the date your employer failed to pass on the money. If your employer has repeatedly failed to comply with the Act by not passing on tips you were entitled to, the 12 months begins with the date of the last failure to comply.
However, making a complaint to a tribunal can be a lengthy process due to current backlogs, and employment tribunals are biased towards the employer. We therefore recommend a ‘twin-track’ approach: submitting an employment tribunal claim while simultaneously applying collective pressure on the employer to force them to comply with the law. For further advice on how to go about this, we urge you to get in touch.
The tipping laws are a bit more complex when it comes to agency workers. If the organisation you’re working for hasn’t followed the rules, you should complain to the person responsible for paying tips to you. This might be your agency or a manager at the organisation where you’re working. If you are unsure who is responsible for paying tips to you, check the organisation’s tips policy or ask your agency.
To cover ourselves, we are required to state that this article has not been written by a lawyer.