Update: Upcoming changes to the allocation of tips for hospitality businesses

Update: Upcoming changes to the allocation of tips for hospitality businesses

Following our previous article, in which we discussed the proposed changes to allocation of tips for hospitality businesses, the Government has been progressing the Employment (Allocation of Tips) bill, with it receiving overwhelming support from both houses in Westminster. As of 15 December 2023, the draft code of practice has been released. It is available for public viewing, with the consultation phase closing on 22 February 2024. For further information on the consultation, please click here.

What hospitality businesses need consider ahead of introduction

The new tips legislation will come into effect on 1 July 2024, so employers are advised to have considered the code and whether their current distribution of tips meet the requirements of the new legislation. Employers whose employees receive tips via a Tronc Scheme should ensure the scheme also meets the new legislative requirements.

The draft code requires employers to:

1. Pass on all tips and service charges to workers without deductions - except in very limited scenarios, such as deduction of income tax.
2. Ensure that tips are distributed in a fair and transparent manner when the employer takes control or exerts significant influence of their distribution.
3. Have regard for this code of practice when they are distributing or influencing the distribution of tips. The code dictates that there needs to be transparency and fairness
4. Maintain a written policy on how tips are dealt with at their place of business and ensure this policy is made available to all their workers.
5. Maintain a record of all tips paid at their place of business, and their allocation and distribution between each worker - to which workers have the right to request access.

The code of practice is still in draft and we await any updates that may come out of the consultation, but it’s clear that many of the proposed requirements will remain. We recommend that all employers whose employees receive tips and gratuities should ensure they are prepared for the changes once confirmed.

We are here to help

If you would like to know more about the changes and how they may impact your business, or discuss Tronc Schemes, please get in touch with a member of our specialist team or your usual Azets advisor.