The next step

Draft Code of Practice on fair and transparent distribution of tips

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Can you avoid new rules on tips?

Tipping legislation. The Employment (Allocation of Tips) Act 2023 and a new statutory Code of Practice on fair and transparent distribution of tips (which is currently still in draft form - see The next step ) are expected to come into force on 1 July 2024. The legislation will make it unlawful for you to withhold tips, gratuities and service charges from workers. You’ll be obliged to allocate 100% of tips, etc. fairly between your staff, and then pay them by the end of the following month. We’ll cover the details of the legislation and Code in a future article.

Brand charge. London restaurant chain Ping Pong has now removed its 12.5% service charge, 90% of which previously went to staff, and banned customers from paying tips by credit/debit card. Instead, it has introduced, on a trial basis, a discretionary 15% “brand charge” for customers which is to go towards “franchise fees and other brand-related expenditure” , not to the staff. It also says it has increased staff wages above minimum wage levels to compensate them for the earnings they would have received with service charge distribution.

Issues. The risks with trying to find a way around the new tipping legislation are: (1) adverse media publicity; (2) worker dissatisfaction, leading to resignations; (3) difficulties in recruiting new staff; and (4)  negative feedback from customers. It’s also not yet clear whether a rebranding for a charge can even sidestep the new law - it’s obviously not in the spirit of the legislation. Plus, if any existing tips or service charge arrangement has been granted as (or become) a contractual right, you’d be in breach of contract in withdrawing it without worker consent (but you can improve the arrangement to comply with the legislation).

Tip. We don’t recommend replacing a current service charge with another type of charge that is designed to avoid the forthcoming new tipping legislation. If you do, be prepared for the consequences.

For the draft Code of Practice on fair and transparent distribution of tips, visit https://www.tips-and-advice.co.uk , Download Zone, year 26, issue 9.