New tips legislation: are you ready for the Employment Act 2023?

Important changes are on the way from 1st October 2024 for all employers taking and distributing tips to their staff. So are you prepared?

Below is a breakdown of the key changes included in the new legislation - the Employment (Allocation of Tips) Act 2023.

Distribution

100% of tips must be distributed to employees, in a fair way, by the end of the month after the one in which the tips were received. This also includes agency staff – the tips can either be paid directly to the agency workers or the agency to which they belong.

Transparent process

Businesses will need to have a written policy available to all staff that contains a full explanation of how tips are distributed. This can either be communicated electronically – through email or placed on a staff portal – or physical copies can be printed and circulated. Agency staff must be provided with the policy as well, and it could be made available to them personally or given to the agency for them to then share with their staff.

Withholding

Under the new law, it will be illegal to withhold tips from staff. The new Code of Practice will protect the tips of more than 2 million workers, giving them a fair share of the tips received by a company.

Deductions

Deductions can only be made for tax, and not for any card charges or administration costs. This will also mean that money from tips cannot be held back in reserve for payment in quieter periods within the business.

Record-keeping

Detailed records must be kept and be readily available for three years. Employees will have the right to request information on how the tips have been distributed. This could be in the form of a written request for the business to provide records covering a specified period, granted that they have worked for the employer at some point during the period. There is a limit of one request per employee in a three-month period.

Tronc

A tronc is an arrangement that can be used to distribute tips efficiently. A troncmaster manages the process and allocates tips according to agreed terms. Tips, gratuities and voluntary service charges can be included as tronc. An independent troncmaster is someone separate from the business such as a third-party provider which manages the distribution of tips for the employer, or it could be a member of staff appointed by employees.

How can EPS help?

• Policies can be published on employees’ MyEPS app to ensure they are accessible to all employees at all times

• Policies signed by the employees in acknowledgement of receipt can be stored on the EPS system under the individual employee HR record

• The gratuities, service charges and tronc modules within EPS can be utilised to ensure records are stored regarding the total amount to be distributed, who they were given to, and how they were ultimately distributed

If you would like to know more about how EPS can help compliance with the new tips legislation, please get in touch by emailing info@eproductive.com.