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On October 1st, the Employment (Allocation of Tips) Act will come into effect in the UK. This act will ensure that 100% of tips and service charges are paid to staff, and will make sure that the allocation of gratuities is dealt with fairly. Here is your guide to the main changes coming into effect: 

100% of gratuities left by customers must be passed on to workers

Currently, there is no legal requirement for all tips and service charges left by customers to be passed directly on to staff. However, under the new legislation, operators will not be allowed to make any deductions on gratuities to cover any admin costs, such as card fees or payroll costs. 

All tips left to a single venue must be allocated to workers in that venue. There will also be a ban on employers negotiating salary or base pay with staff in return for a share of gratuities. 

Agency workers

Under the new legislation, agency workers will now be entitled to a share of tips and gratuities in the same manner as regular employees. There is currently no legal requirement for this. However, it’s worth noting that freelance workers do not fall under the legislation.

 Allocation of tips in a fair manner 

The main objective of the new legislation is to ensure that staff are receiving their tips in a fair manner. This can be left to the discretion of the employer- job role, seniority, or length of service are all factors employers could use in deciding how tips are allocated amongst staff. 

While each business may have different factors influencing the allocation of tips, they must have transparent policies outlining how gratuities are distributed amongst their staff. 

Policies and Records

All employers must have a written policy detailing how gratuities are collected and allocated to workers. These policies must be transparent and available to workers.

Full records of all tips and gratuities must be kept by the business for 3 years. Workers can request access to their record of gratuities. Only one request can be made in a three-month period. 

Businesses must also have a policy on display for customers, detailing how tips are dealt with. 

Reserve Funds 

Currently, it is legal for employers or troncmasters to put away tips or gratuities in a reserve fund, and distribute them at a later date. This will no longer be permitted, and all tips and gratuities must be paid out to staff no later than the end of the month following the month in which the tip is left. For example, if a tip is left by a customer on June 18th, the staff must receive the tip no later than the end of July. 

Complaints and enforcements

Under the new legislation, workers can take complaints to an Employment Tribunal. These complaints must be made within 12 months. Tribunals can order corrective action, or fines/ compensation of up to £5,000 per worker. 

It is worth noting that troncmasters cannot be taken to tribunal. All employers, therefore, must ensure troncs are being run compliantly. 

Tronc and troncmasters 

Tronc arrangements will remain valid under the new legislation. Businesses with a compliant tronc system in place will still be exempt from paying National Insurance Contributions on tips.