LEGAL UPDATES / EMPLOYMENT LAW
There is a new legislation that will make it unlawful for employers to withhold tips, or service charges from their employees.
This change will impact thousands of businesses and millions of workers. Both the employee and the business owner needs to ensure they fully understand this law and this blog is designed to do this.
The Employment (Allocation of Tips) Act 2023 (“the Tips Act”) will come into force on 1 October 2024, imposing new obligations on employers to ensure that tips are allocated fairly among workers. The statutory Code of Practice on Fair and Transparent Distribution of Tips is due to come into force on the same date.
These new rules include some important practical changes for employers in the hospitality, leisure and service industries to be aware of.
There are more and more businesses in the UK seeking tips or service charges from their customer. Customers generally tip or pay service charges in restaurants, bars, and taxi businesses. Then some businesses don’t always have a tipping culture but porters, housekeeping, tour Guides, hairdressers or barbers also have a tipping culture. These businesses will need to follow the clear tipping processes and paperwork in this law.
Employers can still use discretion over tip allocation but must allocate tips fairly under the new Code of Practice.
Employers must publish and distribute a clear policy on tip allocation and keep records of all tips for three years.
Tips are paid by consumers at their discretion to reward excellent service. They are not added to the bill service charges, however, are included as an additional percentage added to a customer’s bill. Business owners set the amount or percentage rate of a service charge. Although not classified as tips, the new laws apply to service charges too, so they must also be shared fairly with all employees in the business.
Another really important part of the act that small businesses might get wrong is agency workers and their rights. Agency workers will be eligible for the same proportion of tips as directly employed staff and are subject to the same rules on fair allocation and timely payments. Employers will have to pass on the agency worker’s share of tips to the recruitment agency that supplied them, who are then required to pay those amounts to their workers within a month of receipt. Agencies will also be responsible for deducting the income tax due, as well as National Insurance where the statutory disregard does not apply.
Tips that are received at a specific venue must be allocated to the staff in that venue, not across multiple locations.
Decide how you will keep records: Ensure you have a tips record-keeping system in place so that staff can request access to this information, as set out in the new law. This will be the hardest and most timely part of the law
Make Work Pay !!
Labour’s plan to make work pay will ensure more people stay in work, make work more family-friendly and improve living standards, putting more money in working people’s pockets to spend, boosting economic growth, resilience and conditions for innovation. Stronger trade unions and collective bargaining will be key to tackling problems of insecurity, inequality, discrimination, enforcement and low pay.
The last Labour government lifted basic minimum rights in the workplace by introducing the National Minimum Wage, the 48-hour working week, 28-days paid holiday, parental leave, and greater protection from unfair dismissal. The Tories opposed every one of them.
But today they are the cornerstone of our working lives. Labour, working with businesses and trade unions, has transformed the world of work before, and we can do so again. A step change is needed in how working people exercise control over their working lives, and businesses need urgent action to address our poor productivity.
Labour is pro-worker and pro-business, and we will work in partnership with trade unions and business to deliver our New Deal.
Right To Switch Off
The new government pledged to introduce a right to switch off so workers’ homes did not become 24/7 offices, with ministers exploring models in other countries, particularly in Ireland and Belgium, where workers already have a similar right.
Forming part of its Plan to Make Work Pay, the government said the right to switch off would allow workers and employers to have “construction conversations and work together on bespoke workplace policies or contractual terms that benefit both parties”.
The policy would also reportedly involve a code of practice agreed by employers and employees. The Times reported last month that employers who repeatedly breach an agreement could have thousands of pounds added to their compensation bills if they were taken to a tribunal.
HR teams begin by analysing employee issues and preferences and discussing potential approaches. “It’s important to include people at all levels of seniority, especially those with alternative working patterns. Leadership set the culture, and HR would be instrumental in fostering an attitudinal shift whereby employees and managers acknowledge the boundaries between work and personal life. Any policy would need to be seen to be fair and consistent in application,” she explained.
HR would need to develop and implement a right to switch off policy, which would mean “freeing up existing HR resources to look at what this will mean in practice or get an external expert involved to interpret changes and advise”.
HR will need to establish clear and specific guidelines on out-of-hours contact, detailing in what circumstances managers are permitted to contact their employees.
Fire and Rehire Update
The Supreme Court rules that Tesco may not use fire and rehire to withdraw a collectively agreed contractual benefit that it had previously described as “permanent”.
The benefit in question was a pay uplift (retained pay) given to warehouse workers who relocated to a new distribution centre as part of a restructuring. The organisation later stated that it wanted to align pay with similar staff, and therefore offered a lump sum to give up the retained pay. Those who refused faced being dismissed and re-engaged on the new terms. Following legal action by USDAW, a High Court injunction prevented these changes – the Court of Appeal then overturned this, leading to the final appeal to the Supreme Court.
On 12 September 2024, the Supreme Court reinstated the injunction and therefore stopped the removal of the contractual benefit.
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