Distributing tips fairly: statutory code of practice – GOV.UK (www.gov.uk)

In summary, the Act and Code require that all tips received or controlled by the business operator be passed to workers without deduction save for Income Tax and sometimes National Insurance.

Tips may be qualifying tips whether they are received by the employer or the worker. If the business operator receives them or if they are received by the worker but the operator exercises control or significant influence over the distribution of tips, then they are qualifying.  The Code applies to tips received by card, cash or other means, such as an app.

If, however, a worker receives and keeps a cash tip, with no employer control or involvement, then the tip is out of scope for the Code. Digital tipping, whereby a customer uses an app to directly tip members of staff, bypassing the employer altogether, is also out of scope.

Tips must be distributed in a fair and transparent manner and business operators must have regard to the Code when distributing tips.

Below are some factors to consider when making a fair distribution.  There may be others appropriate to particular sectors/organisations:-

• There does not have to be an equal distribution amongst workers
• Consider the workers role
• Consider the workers basic pay
• How many hours worked
• Individual or team performance
• Seniority
• Length of time served with employer
• Customer intention

Business operators should consult with workers to seek broad agreement on a system of allocation.  They should consult with Trade Unions where appropriate.

All business operators must have a written policy (unless staff only receive tips occasionally and exceptionally) and review the policy in line with staff changes and changes in the organisation. The policy must be available to be viewed by all workers.

Operators must maintain a record of all tips paid and their allocation and distribution.  All workers have the right to make a written request for access to this information once in a 3 month period.  Workers are entitled to see information during the period of their employment, going back up to a maximum of 3 years.

The Act and Code apply to all employees and workers, including agency workers, but not the self-employed.  If a business operator sends tips to an agency who supplied staff, then the agency becomes responsible for passing tips to employee.

Tips can be paid via payroll or via an independent tronc (system for collecting and distributing tips) operator.  This can be a member of staff or an external payroll operator or accountant.  The tronc operator must be instructed by the business operator to comply with the Code.

Tips are to be paid by the end of the month following the month in which the tips are paid by customers.

The business operators’ policy must include a process to deal with queries from workers. If a query is not resolved, then workers can apply to the Employment Tribunal for relief.

Now is the time to draft your Tipping Policy in line with the Code to be ready for 1st October.

Please contact Marina Vincent at marina.vincent@haroldbenjamin.com if you have questions on the topics covered here, or would like to get a tipping policy (or other employment related policy) drafted.