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The law around tipping in England, Scotland and Wales has changed.
Whether you call them tips, gratuities, or service charges, the Employment (Allocation of Tips) Act 2023 states you must pass 100% of tips to your workers, without any deductions.
All so-called ‘tipping industries’ are affected – not just restaurants, cafes, bars, and hotels but also taxis, tourist services, health and beauty, gambling and gaming… any business where tips are routine.
And the tip doesn’t have to be money. If it has monetary value, such as a stamp or a gambling chip, it’s included.
It’s estimated this will see more than £200 million reach the pockets of workers that might otherwise have been retained or deducted.
“The hospitality industry has struggled for years with staff shortages. This is a way to improve perceptions, conditions, transparency and fairness for workers – which may help attract more workers back to or into the sector,” says Dave Wheatcroft, our Head of European Hospitality.
“It also makes sure employees receive the recognition they deserve for their role in providing a great customer experience,” he adds.
It’s long been the case that tips left in cash for workers either go directly to them in full or are pooled and shared informally between teammates on a shift.
Tips paid through digital methods or as a service charge included in the bill or fare is where the biggest change will be felt. Headline-grabbing exposés in the industry claim some businesses were keeping tips completely or deducting fees (as high as 15%) before sharing them on to workers.
The Employment (Allocation of Tips) Act ends that inconsistency.
Technology can help you get prepared
As employers, you’re responsible for making sure every penny that’s classed as a tip or service charge is passed to the workers. 100 per cent.
“Pretty much every point-of-sale device can take tips while someone’s paying the bill, but not all are ‘switched on’ to do it,” says Patrick Doyle, our Head of Point of Sale
“Getting them ready isn’t a big deal but we suggest getting it underway sooner rather than later so you’re ready in good time for the law and processes it brings with it.”
If your devices are from Elavon, contact us and we’ll help you.
If your payment devices are from a third party, then you’ll need to contact them.
In a nutshell, the Employment (Allocation of Tips) Act 2023 sets out:
- Employers must make sure 100% of customer tips, including those paid by credit card, are given to staff – without any deductions. In particular, it will be unlawful to deduct fees or administrative charges from tips.
- The law applies to all employees and workers, including agency staff and those on zero-hours contracts.
- Employers will need to have a written policy on distribution of tips to staff. A statutory Code of Practice has been published to help advice on how to adopt the changes for your business model.
- Employers must keep a written record of how the tips and service charges are allocated for three years from when the tip is received by the worker.
- All tips must be received by the workers by the end of the following month they were paid to the business. For instance, tips left in July would need to be paid to works by the end of August.
- Most point-of-sale devices can take tips but may not yet be ‘switched on’ to do it. If your devices are from Elavon, contact us and we’ll help you. If your payment devices are from a third party, then you’ll need to contact them for help.
- You must have a written policy that’s shareable with your workforce. A draft Code of Practice has been issued for input from the industry and to help prepare your business for the changes.
- Your employees’ tips are protected, and they’ll be able to ask to see an employer’s tipping record. So you’ll need to be able to demonstrate transparency and that you’re doing this for your workers.
- Workers will have their tips protected and be able to view an employer’s tipping record.
- It’s estimated £200 million will reach workers that would otherwise be kept or deducted.
- Withholding tips from workers becomes legally actionable.
Among elements the Act lays out, tribunals will be able to compel employers to revise your tip allocation policies, order you – the employer - to pay tips and service charges to the claimant and to any workers employed by you, and award up to £5,000 per claimant to reflect additional financial losses caused by non-payment.
And if you get a reputation for not handing on tips, that could damage morale, see you lose staff, and struggle to attract new workers.
28 January 2024
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Copyright© | Elavon Financial Services DAC. Registered in Ireland with Companies Registration Office. The liability of the member is limited. United Kingdom branch registered in England and Wales under the number BR022122.
Elavon Financial Services DAC, trading as Elavon Merchant Services, is a credit institution authorised and regulated by the Central Bank of Ireland. Authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request.
Helping thousands of customers around the world grow their business through payments
Customer service and support
We’re here to help!
Customer service: 0345 850 0195
8am to 6pm, Monday to Friday
Opayo product support: 0191 313 0299
24 hours a day, 365 days a year
Copyright© | Elavon Financial Services DAC. Registered in Ireland with Companies Registration Office. The liability of the member is limited. United Kingdom branch registered in England and Wales under the number BR022122.
Elavon Financial Services DAC, trading as Elavon Merchant Services, is a credit institution authorised and regulated by the Central Bank of Ireland. Authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request.
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