Are your employees being tipped fairly?

From 1 October 2024 new laws were introduced, to ensure that the staff that earn tips, get them. Whilst primarily we think of tipping being a hospitality benefit, it also applies to any profession where workers receive tips, paid either by card or cash.

Many hospitality staff earn Minimum Wage (or Living Wage) and for years workers have relied on tips to top up their salaries and this law will protect them, ensuring that all tips are allocated fairly across the board.

Whereas previously employers have used their discretion on tip allocation, they now must allocate tips fairly amongst workers, publish and communicate a clear policy on tip allocation, keep a record on how tips are distributed and of course, also ensure that all tips receive the correct treatment for PAYE, the table below explains the different actions.

Whilst previously businesses may have paid tips quarterly or even annually, now tips must be paid no later than by the end of the calendar month after they were received.  Employers are not allowed to deduct from tips to cover admin expenses and 100% of tips must be allocated to staff members.

Employers could be taken to an employment tribunal if the new rules are not followed so it’s important that, if you don’t already, you look at your tips policy and make sure you are following the guidance, which can be found on the link below:

Distributing tips fairly: statutory code of practice - GOV.UK (www.gov.uk)