Key Changes introduced to the Employment Rights Act

New legislation has been introduced into the Employment Rights Act 1996 from 1 October 2024 to deal with tips, gratuities and service charges. The new rules make provision for how employers must deal with qualifying tips, gratuities and service charges and for the Secretary of State to issue a Code of Practice to promote fairness and transparency in relation to the distribution of qualifying tips, gratuities and service charges.

‘Qualifying tips, gratuities and service charges’ means:

• employer-received tips; and
• worker-received tips which are subject to employer control or are connected with any other worker-received tips which are subject to employer control.

The basic rule is that an employer must ensure that the total amount of the qualifying tips, gratuities and service charges paid at the employer’s place of business is allocated fairly between workers of the employer at that place of business.

Where a worker is allocated an amount of employer-received tips, that amount is payable to the worker by the employer.

Where the employer makes arrangements for the total amount of the relevant tips to be allocated between workers by an independent tronc operator and it is fair for the employer to make those arrangements, the employer is to be treated as having ensured that the total amount of the relevant tips is allocated fairly allocated between workers.

The employer must ensure that a qualifying tip, gratuity or service charge is allocated, and make any payment that the employer is required to make to a worker, no later than the end of the month following the month in which the tip, gratuity or service charge was paid by the customer.

Where qualifying tips, gratuities and service charges are paid at, or are otherwise attributable to, a place of business of an employer on more than an occasional and exceptional basis, the employer must have a written policy on dealing with qualifying tips, gratuities and service charges for the place of business.

The Code of Practice can be accessed at https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice

Obviously, for certain businesses there is a lot to think about.