This legislation, which came into force last week, aims to benefit over three million service workers in the UK, notably those in restaurants, cafes, bars, pubs, hairdressers, and taxis. 

Under the new law, all tips—whether received in cash or by card—must be handed to employees by the end of the following month from when they were received. Particularly benefiting employees in roles where tipping constitutes a healthy portion of their monthly income. 

Workers will still be required to pay tax on their tips, consistent with previous tax laws. However, the significant change lies in the prohibition of companies from withholding any portion of these tips. If companies breach this law and retain tips, employees are now legally empowered to bring claims to an employment tribunal. 

Speaking on the new legislation, Hannah Dowd Employment Law Solicitor at Jackson Lees, says:  

The new laws on tipping are welcomed and fantastic for employees and workers of service businesses. Unions have also welcomed the changes across the UK. However, there are some areas of the legislation which require further guidance and clarity.  

“The new tipping legislation requires businesses to have written tipping policies, allowing workers to access their tipping records and file claims for withheld tips. 

“This could result in substantial pay-outs for workers in certain industries. Employers who fail to comply may face Tribunal action and/or fines. Further, the Act also widens the scope for potential claims for unlawful deduction of wages claims, as it incorporates tips in the definition of wages. 

“The legislation will give employers flexibility when deciding on how tips should be allocated, they are also not expected to allocate the same proportion of tips to all workers.  

“We are hoping that fairness is maintained through employers having to demonstrate some kind of fair rationale for their decision making. However, this is where we envisage there being potential issues. There doesn’t appear to be clear guidance on fairness and so it would be sensible for employers to seek their workers agreement to tipping policies/apportionment of tips prior to making any decisions.” 

While the new tipping legislation is a significant step forward in protecting service workers' rights, it also introduces new challenges and considerations for both employers and employees. 

The success of this legislation will largely depend on its implementation and the willingness of businesses to engage in fair and transparent practices. To navigate these new requirements and avoid legal repercussions, businesses must now ensure they have a transparent tipping policy, documented agreements with workers, and clear records of received and distributed tips. 

Employers should stay informed of any further guidance or amendments to the legislation to ensure they remain compliant. Equally important, workers should be aware of their rights under this new law, empowering them to seek transparency and fairness in their tipping practices. With these measures in place, the new tipping legislation aims to foster a more equitable environment for service workers across the UK. 

Jackson Lees Solicitors will be closely monitoring these developments and providing updates to help you navigate the changes. If your business requires any assistance in making sure you are compliant with these new changes, we can help. Call us today, request a call back, or make an enquiry to speak to our employment law experts.