New Tipping Policy Law: A Guide for Employers
As of Tuesday, 1st October 2024, a significant new law has come into effect in the UK, mandating that businesses must pass 100% of customer tips to their employees.
This legislation is set to impact thousands of employers, particularly in businesses where tipping is common, such as:
► Bars, Cafés, Restaurants and Coffee Shops
► Taxi Drivers
► Hairdressers & Barbers
► Beauticians & Therapists
► Hotel Workers
And many more
Whether tips are given in cash or via card, companies are now legally obliged to ensure that these gratuities reach their intended recipients—the employees.
The UK Government has noted that 80% of tipping is now conducted via credit or debit card, highlighting the need for businesses to modernise their tipping practices. Failure to comply with this new law can result in serious legal and financial consequences, making it crucial for employers to take immediate action.
What the New Tipping Law Entails
Under the new law, businesses must distribute all customer tips to employees by the end of the following month.
This applies to both cash and card payments.
Any failure to comply gives employees the right to take legal action through an Employment Tribunal, putting companies at risk of significant penalties.
To mitigate these risks, employers must ensure they have robust policies and procedures in place, as this law is now in full effect.
For many businesses, this will necessitate a review and overhaul of current practices to ensure compliance. Companies that have traditionally managed tips informally must now implement transparent systems to track and allocate tips fairly and efficiently.
Measures Businesses Should Take
To ensure compliance with the new tipping law, businesses should consider the following actions:
Review and Update Tipping Policies
All businesses should promptly review their existing tipping policies and make the necessary updates. The law requires that tips be distributed by the end of the following month, so clear procedures need to be established to meet this deadline.
Establish Transparent Systems
It’s essential to set up clear systems for recording and distributing tips. Transparency is key to avoiding disputes and ensuring that employees feel confident in the process.
Train Staff
Employees need to be fully informed about the new law and understand their rights. Training should be provided on how tips will be distributed, as well as how they can raise concerns if they believe the business is not complying. A well-informed workforce is less likely to bring disputes or claims, as they will better understand how the new system works.
Maintain Detailed Records
Documentation is critical under the new law. Businesses must keep accurate records of all tips received and how they are distributed. This will be vital in case of an audit, legal claim, or dispute. Detailed records will also help defend against any potential Employment Tribunal claims.
Communicate Regularly with Staff
Open communication with staff is essential, not only during the implementation of the new law but as an ongoing practice. Encourage feedback from employees to help identify any issues early on and prevent disputes. Regular communication helps manage expectations and reduces the likelihood of complaints or claims.
The Consequences of Non-Compliance
Businesses that fail to comply with the new tipping law could face a range of consequences, including:
Employment Tribunal Claims: Employees can bring legal claims if they believe their tips have been withheld or unfairly distributed.
Reputational Damage: Non-compliance with the law can damage a company’s reputation, particularly in industries where employee treatment is highly scrutinised.
Financial Penalties: Successful Tribunal claims can result in significant financial penalties for employers.
Operational Disruption: Legal disputes can disrupt business operations, diverting valuable time and resources away from day-to-day management.
Regulatory Scrutiny: Non-compliant businesses may attract increased attention from regulatory bodies, leading to further inspections and potential penalties.
How can we help you prevent legal problems?
With the new tipping law now in effect, it’s imperative for businesses to seek legal advice to ensure their practices are compliant.
At Peter Lynn and Partners Solicitors, we can assist in reviewing and updating your tipping policies, implementing transparent systems and updating staff handbooks.
Early legal advice can help mitigate the risk of Employment Tribunal claims and ensure that your business avoids the potential pitfalls of non-compliance.
For an initial consultation on this matter or any employment-related issues, contact us at 01792 450010 or email [email protected]
Peter Lynn and Partners
Preventing Legal Problems.