The Employment (Allocation of Tips) Bill received Royal Assent in May, becoming the Employment (Allocation of Tips) Act 2023 (the “Act”), and is expected to come into force in May 2024. The Act has been introduced after research suggested that employers in the UK were deducting as much as 10% from tips given to their workers. The Act creates a legal obligation for employers to allocate tips, gratuities, and service charges fairly between workers.

What are the key provisions?

• The Act applies to qualifying tips, gratuities, and service charges (together “tips”). Qualifying tips include those that are received by the employer directly, or that are subject to employer control.
• Allocate the total amount: The obligation to share tips fairly will apply to the total amount of tips received. Tips must be shared between workers at that particular venue, and not distributed across the business. The payments to the worker will be subject to deductions for tax and national insurance contributions.
• Pay within one month: Tips will need to be allocated and paid to workers no later than the end of the month following the month in which the tips were paid.
• Have a written policy: Where tips are paid on more than an occasional or exceptional basis, employers will need to have a written policy detailing whether tips are encouraged in the workplace and how tips are allocated.
• Maintain records: Again, where tips are paid on more than an occasional or exceptional basis, employers will need...

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