How businesses can prepare for the Allocation of Tips Act 2023

With the Employment (Allocation of Tips) Act 2023 legislation coming into force on 1st October 2024 set to benefit more than 2 million UK workers across hospitality, leisure and services sectors, many operators are getting prepared to ensure they stay on the right side of the legislation and ultimately ensure their teams are paid fairly. 

But managing, distributing and calculating tips can prove challenging for operators, between an increasing reliance on agency workers to short term contracted staff and different holiday considerations – there’s a lot of nuances to work through before the legislation comes into force. 

The Access CPL Learning team are here to help you get ready for the legislation update and instil confidence in your teams. In this article, we offer some tips on getting prepared as well as offer some expert-led free learning resources for your teams. 

How does the legislation define tips and gratuities?

Firstly, let’s establish what is defined as tips and gratuities as per the legislation. The Tipping Act now distinguishes between tips collected digitally, directly from customers to staff, and those that pass through the employer’s hands. Tips collected digitally, straight to the staff, fall outside the scope of employer-received tips, provided these platforms operate correctly and adhere to HMRC guidance. On the other hand, employer-received tips include those processed by the employer, such as tips made via card payment to the business. Worker-received tips are straightforward – they’re the ones that go directly to the staff member, like handing a cash tip to a waiter. 

Top tips for preparing ahead of the new tipping laws in the UK.

Now that we know what we’re dealing with, let’s look at some top tips for getting prepared ahead of the Allocation of Tips bill. As providers of pretty much every aspect of compliance training, we here at Access make sure we’re up to date on any new legislation to support our customers. We consulted with sector experts from the likes of UK Hospitality, The Tronc Advisor and TiPJAR to develop the following checklist. 

1. Establish clear policies and procedures.

Your teams might need help understanding the new legislation and what it means for them. Being as transparent as possible about your tipping policies and procedures and making them easily accessible will help your teams feel confident in exercising their rights.

2. Check current processes.

Now’s the time to look at your current processes, looking closely at your HR and payroll systems to ensure your processes are compliant with the new legislation and that you have everything in place for reporting requirements.

3. Create a fair tipping policy.

If your current tipping policy isn’t fit for purpose, start developing a new fair tipping policy for your operation. Thinking about whether you want to set up a tronc system and whether you want to manage that internally or with the support of software or an external troncmaster. 

The code strongly advises employers to work with their teams in developing tipping policies that align with what their teams consider “fair”. In addition, you’ll want to ensure fairness and equality within your policy, as the legislation will offer strengthened provisions to prevent any discrimination in the distribution of tips. 

4. Talk to relevant third parties.

If you regularly contract in agency staff, engage in open communication with external agencies to establish fair tipping practice for agency workers. The latest update to the legislation clarifies that businesses hiring agency workers will be regarded as the business that hires the agency worker in regard to tip allocation. If tips are passed to agencies for payment to workers, the agency retains the obligation to ensure no deductions (aside from income tac) are taken from tips.  

5. Appoint a troncmaster.

When choosing between internal and external troncmasters, consider the pros and cons of each. External troncmasters offer expert guidance, flexibility and administrative relief, but at a cost. Internal troncmasters may save costs but require significant administrative oversight. Ultimately, you’ll need to decide based on your business’s needs and resources. 

6. Get ready for reporting.

Under the new tipping legislation, operators will have reporting and transparency requirements they must adhere to. Your employees will have the right to request tip information, which will mean businesses must maintain records of tips collected and distributed as well as define how long they should keep the records.

7. Look at your current software.

If you currently utilise payroll or scheduling software, there may be tools and features already that can help you manage your tipping policies. Talk to your provider to learn more.

8. Review holiday payment practices.

Be sure to look over your current practices regarding the payment of tronc during holiday periods. Many businesses have established practices that continue to pay tronc even when staff are away, and this may cause issues under new legislative practice as the code prioritises hours worked as a primary factor in deeming what is ‘fair’ under the legislation.

9. Train your teams.

Training is going to be of huge importance in ensuring that your teams understand their rights and your managers understand the importance of a fair tip allocation policy and how to distribute tips fairly. By training your teams, you will ensure the highest level of understanding and build trust with your teams. 

Here at Access CPL Learning, an Access company, we’ve developed a brand-new course for both managers and team members to help navigate the new legislation. 

How you can get ready ahead of the new tipping laws.

Here at Access CPL Learning, we’ve developed free e-learning courses to support operators by introducing the Allocation of Tips Act to their teams. With both a manager and team member version of the course, our goal is to enhance understanding of the legislation, responsibilities towards team members and what it means for your operation going forward. 

Developed in collaboration with TiPJAR, an award-winning cashless tipping and tronc platform, we’ll continue to update the course in line with any updates, as the draft Code of Practice accompanying the act is still in development. 

Support your teams with these new free courses to equip your managers and their team members with the knowledge and tools to navigate the new legislation confidently. And we’ll continue in our commitment to support operators in ensuring the fair treatment and transparent allocation of tips, empowering teams and strengthening the hospitality industry as a whole. 

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