Our client runs a busy restaurant that is popular with both tourists and locals. Typically, their bar and waiting staff receive a considerable amount in tips, either directly from customers or through the service charge our client adds to bills on busy nights. They’ve reached out to us regarding the upcoming changes to the law on tips, which they understand will impact them later this year. What does this new law entail, and how should they begin preparing for it?
It has been announced that the Employment (Allocation) of Tips Act 2023, along with supporting regulations and a new statutory Code of Practice on fair tip distribution, is expected to take effect on 1 October 2024.
This follows various efforts to legislate tip allocation, aiming to ensure employees receive 100% of qualifying tips from their employer.
The new law requires employers to ensure all qualifying tips, whether paid at or linked to their business, are fairly distributed among workers. Qualifying tips include both employer-received tips and certain worker-received tips controlled by the employer. These must be allocated fairly among staff.
If a worker receives and keeps a tip without employer involvement, that tip is outside the law’s scope. Digital tipping, where customers tip staff directly via an app, is also excluded.
To guide employers in ensuring fair allocation, a statutory Code of Practice has been introduced, outlining key principles and considerations.
Employers will need to regularly review and update their tip distribution methods to maintain fairness.
Preparation
To prepare for the new law, it is crucial to consult with workers or their representatives to reach a broad agreement on how tips will be allocated.
A written policy is also required where tips are paid, detailing:
- Whether the employer requires or encourages customers to leave tips; and
- How the employer ensures that all qualifying tips, whether paid at or attributable to the place of business, are managed, including how tips are allocated among workers.
The policy must be written in clear, plain language, and an accessible format must be provided on request for any worker with a disability.
A new tribunal claim will be introduced, allowing employees to challenge an employer’s tipping practices. If the Code is not followed, there is a potential 25% increase in any award given.
