Under the Employment (Allocation of Tips) Act which received royal assent earlier this month, workers will have a legal right to any tips, gratuities and service charges paid by customers at their workplace.

The government estimates that the new legislation will mainly benefit two million hospitality, leisure and service sector staff who, they say, will be better off by about £200 million a year.

The act requires employers to ensure that “the total amount of qualifying tips, gratuities and service charges paid at, or otherwise attributable to, a place of business of the employer is allocated fairly between workers of the employer at that place of business”.

In other words, employers are now legally obliged to pass on the actual amount paid by the customer at that specific workplace to all workers, including agency workers.

They must also ensure that any tips are allocated and paid to workers no later than the end of the month following the month in which the customer paid them. For example, if a qualifying tip was paid on 8 April, the employer would need to deal with the tip by 31 May.

Employers must also keep a record of how they have dealt with “every qualifying tip, gratuity and service charge paid at, or otherwise attributable to, the place of business” and maintain those records for three years from the date on which it was paid.

Under the act, a new statutory code of practice will be developed to advise businesses and staff on how tips should be distributed. According to the government, the code is being developed and will be subject to formal consultation later this year.

The government has also announced that workers will receive a new right to request more information relating to an employer’s tipping record, enabling them to bring a claim to an employment tribunal within 12 months of the employer’s failure to comply with the legislation.

The measures in the Employment (Allocation of Tips) Act 2023 will come into force via secondary legislation about a year after royal assent. The government has said it will confirm the commencement date later this year.

To read the act in full, click here.

To read the explanatory notes, click here.