What you need to know

From 1 October 2023, withholding tips from workers will become illegal under the Employment (Allocation of Tips) Act 2023.

This new law means that employers must pass on all tips and service charges to workers without any deductions and must distribute them in a "fair and transparent manner".

What does this mean in practice?

Although the code of practice outlines that businesses must allocate tips fairly and transparently it does not provide any set requirement to distribute the same percentage to all workers. Instead, it outlines that tip allocation can be based on factors such as:

• Type of role or work
• Basic pay
• Performance (individual and/or team)
• Seniority or responsibility level
• Length of service
• Customer intent

What action do employers need to take?

To ensure that employers remain compliant with the new act they must:

• Create a written tipping policy
• Make that policy available to all workers
• Keep records of tip allocation and distribution for at least three years (as workers can ask to see this)
• Consult with workers to ensure the tipping system is fair and reasonable

What should you do next?

If you haven't done so already you should schedule time to create your Tipping Policy (or update this where you already have one in place)

Once you have a policy that aligns with the new act ensure that managers are trained on the new requirements and importantly make a copy of policy readily available to everyone via your HR software.

Finally, don't forget to consult with your team to gather feedback on the fairness of the tipping system and make any necessary adjustments.

For assistance with your policies and procedures, contact us today.

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