Employment Law: what should happen to tips?

From 1 October 2024 a new law came into force, known as the ‘Tipping Act’. This means that employers must pass on all tips to their workers, explains Alex Jones, Managing Director of 365 Employment Law.

Tips include money given to employees by customers, as well as service charges that are added to the bill.

If customers often give tips in your workplace, your employer must have a written tips policy. However if customers only give tips a few times a year, your employer doesn’t need to have a written policy.

If you’re not sure if your employer controls tips, you should check if they have a tips policy. If they do have a tips policy, the new law says it must be fair and easy to understand. Your employer must keep records of all tips that are paid.

If your workplace doesn’t follow the new law, you can complain and your employer should take action.

If a customer directly gives you a tip in cash or through a tipping app it isn’t covered by this new law.

It’s your responsibility to pay tax on tips you get directly from customers.

Check if you’re protected by the Tipping Act

The new law applies if your employer collects tips and shares them out. For example, it might apply if you work in a:

• pub, bar, cafe, or restaurant

• hair or beauty salon

• casino

The new tipping law applies to:

• employees

• agency workers

• people who have zero-hour contracts

If you’re self-employed, these new rules won’t apply to you.

Check how your employer should share tips with workers

Your employer doesn’t have to share the tips equally between workers but they must make sure the process is fair, clear and reasonable.

For example, your employer might decide to give a bigger share of tips to staff who have worked at the company for longer.

Your employer can also consider the customer’s intention. For example, if the customer wanted to tip a particular worker, your employer might choose to give all of the tip to them.

You have the right to not be discriminated against at work because of something about you, like your sex, race or disability. This also applies to sharing out tips.

For example, the policy might be discriminatory if it means men get more tips than women.

If you have any concerns about the policy, you should complain to       your employer.

Check when you should get your tips

You should get your tips by the end of the month after they are given.

For example, if a customer gives a tip on 12 October, your employer must give it to their workers by the end of November.

Check what your employer can take from your tips

Your employer might have to take some money from your tips to pay for any tax or National Insurance.

They can’t take anything else from your tips – for example, admin charges when tips are made using card payments.

If your employer tries to take anything else from your tips, you can complain – even if they say your contract allows it or that you’ve agreed to it.

Your employer might arrange for a ‘tronc’ or a ‘troncmaster’ to organise the tips. This might be an independent business, or someone who works at your company. The tronc or troncmaster is responsible for making any deductions for income tax.

Tips and the National Minimum Wage

You usually have the right to get paid at least the National Minimum Wage. This includes if you’re:

• a casual worker

• on a zero hours contract

• an agency worker

Your employer must pay you at least the National Minimum Wage before they add your share of tips.

Check your employer’s tips policy

Your employer must make sure all their workers can access their tips policy. If you’re not sure where to find it, ask your employer.

The policy should explain your employer’s approach to tips – for example, who’s responsible for sharing out the tips and how the tips will be shared.

You can also ask to see your employer’s ‘tipping record’. This is a record of all the tips that were paid to staff over the last 3 years.

If your employer doesn’t follow the rules

You should talk to your manager or raise a grievance if you:

• think they haven’t shared the tips out fairly

• can’t access their tips policy or tipping record

Your employer should have a fair process for dealing with your issue.

If you can’t raise a grievance, or you’ve tried and that hasn’t worked, you can take your employer to an employment tribunal.

If you’re an agency worker

If the organisation you’re working for hasn’t followed the rules, you should complain to the person who is responsible for paying tips to you. This might be your agency or a manager at the organisation where you’re working.

If you’re not sure who’s responsible for paying tips to you, check the organisation’s tips policy or ask your agency.

For further advice, either as an employer or employee contact us at 365 Employment Law.

www.365employmentlaw.co.uk