The Impact of New Tipping Legislation on the Hospitality Sector
Insights from Rob Lazenby, Head of Castle’s Hospitality Division and Anna Wilson, Director of Castle HR & Training Solutions.
According to recent government analysis, companies withholding tips from staff is a significant issue, with an estimated £200 million being withheld annually, according to a recent report in HR Magazine. This practice has led to inconsistencies across the hospitality and service sectors. However, new legislation is set to address this issue comprehensively.
New Legislation Overview:
The Employment (Allocation of Tips) Act 2023, effective from 1st October 2024, will make it illegal for employers to withhold tips and service charges from their staff. This act was introduced following extensive public consultation, reflecting concerns within the hospitality sector about current tipping practices.
Key Provisions of the Act:
Fair Distribution: Employers must allocate all tips, gratuities, and service charges to workers without deductions, ensuring fair distribution.
Code of Practice: Section 9 mandates a code of practice that employers must follow, emphasising fairness and transparency in the collection and distribution of tips.
Written Policy Requirement: Employers must have a written policy on tips accessible to all staff and maintain records of tip allocations for three years.
Legal Recourse for Workers: Employees can bring claims to employment tribunals for non-compliance, with tribunals empowered to order compensation and revise unfair tip distribution.
Implications for Business Practices:
Rob Lazenby "As a hospitality recruitment consultant, I recognise the significant impact of the Employment (Allocation of Tips) Act 2023 on industry practices. Ensuring 100% of tips are fairly distributed to employees and agency workers is crucial for fostering transparency and equity. While compliance may pose an administrative challenge, it enhances employee trust and satisfaction, which are key to attracting and retaining top talent. This legislation should be seen not just as a compliance necessity, but as an opportunity to build a more motivated and loyal workforce."
Anna Wilson, Director of Castle HR & Training Solutions adds “this legislation underscores the importance of HR staying up to date with legal changes to advise and guide their organisations effectively. The need for clear, transparent, and fair tip distribution policies is now more critical than ever”.
Benefits and Challenges:
For Workers: The legislation aims to ensure that workers receive the tips they earn, promoting fairness and potentially increasing job satisfaction and retention.
For Employers: While this might mean a shift in business practices, it also provides an opportunity to build a more transparent and equitable workplace culture. However, businesses must prepare for potential financial impacts and ensure compliance to avoid legal disputes.
The Employment (Allocation of Tips) Act 2023 is a significant step toward fairer treatment of hospitality workers. Employers must take proactive measures to align their practices with the new legal requirements, ensuring that their staff receive the tips they are entitled to without any undue deductions. This change not only benefits workers but also enhances the overall integrity and attractiveness of the hospitality sector.
To ensure your business is ready for the new tipping legislation, Castle HR & Training Solutions offers comprehensive support in creating your written policies on tips for all staff. Our experts can help you develop clear, transparent and compliant policies, ensuring your organisation meets the requirements of the Employment (Allocation of Tips) Act 2023. Don’t wait until the last minute – get in touch with us today to have your policies in place and ready for the 1st October.
