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Preparing Your Business For The Employment (Allocation of Tips) Act 2023
The landscape of tipping and service charges in the UK is set to undergo a significant transformation with the introduction of the Employment (Allocation of Tips) Act 2023 later this year.
This legislation aims to eliminate uncertainties surrounding the allocation of service charges and other tips, ensuring that employees receive their due share.
In this article, we delve into the current system and the forthcoming changes that businesses in the leisure and hospitality sectors should be aware of.
Current System: How Does It Work?
At present, “tipping” typically encompasses both tips (whether in cash or card) and service charges, which can be discretionary or mandatory. When customers give cash tips directly to staff, these tips essentially become the property of the employee. While their employment contract may stipulate otherwise, it is generally up to the individual to decide whether to share these tips with colleagues.
On the other hand, when tips and service charges are collected by the employer—whether through a tip jar on the counter or a 12.5% service charge added to the bill—the distribution methods can vary. These range from the employer determining the allocation of tips and service charges to the staff members themselves agreeing on the day’s distribution of cash tips.
Additionally, many businesses put in place a “tronc” system, being a mechanism which allows tips and service charges to be pooled and distributed among staff by a designated “Troncmaster” without direction from the employer. It is worth noting that the chosen method of collection and distribution carries tax and national insurance implications, which will not be covered in this article.
Currently, there are no restrictions on businesses deducting amounts from the collected tips and service charges before distributing them to staff. While there may be valid reasons for such deductions—such as the operational costs of administering a tronc scheme—media attention has increasingly focused on employers making significant deductions from service charges, particularly as around 80% of UK tipping now occurs via card payments.
Five key changes Under the Employment (Allocation of Tips) Act 2023 are as follows:
1. Prohibition of Deductions
Under the new legislation, businesses will no longer be permitted to make deductions from the tips and service charges collected. Every penny collected must be distributed to the staff, with deductions only permissible for tax or as otherwise authorised by law.
2. Obligation To Allocate Tips Fairly
Businesses will be obligated to allocate tips and service charges “fairly” among workers. Although the legislation does not specify what constitutes fair allocation, this is expected to be clarified in due course. Employers will be required to have a written policy outlining the fair, transparent, and consistent distribution of tips.
3. Time Limit For Payment
Tips and service charges must be paid to eligible workers no later than the end of the month following the month in which the tip or service charge was received.
4. Record-Keeping Requirements
Employers must maintain records of the allocation and distribution of tips for a minimum of three years from the date they are received.
5. Right To Claim In Employment Tribunal
Employees will have a separate right to bring a claim in an employment tribunal if there is a breach of these requirements. The tribunal may, among other remedies, order compensation of up to £5,000 to an affected employee to compensate for any losses suffered.
Final Comments
The implications of these changes are significant, particularly for employers in the leisure and hospitality sectors. With businesses already facing financial challenges, the additional administrative burden of distributing tips and service charges could strain resources. One alternative may be to pass these costs back onto customers, but this is unlikely to be popular in the current economic climate.
In light of the forthcoming legislation, it is prudent for businesses to start implementing the necessary policies, structures, and procedures now. By doing so, businesses can be better prepared to comply with the new requirements and ensure compliance from the outset.
To discuss any of the points raised in this article, please contact Adam Convisser or fill in the form below.
Some of Our Sponsored Workers Work From Home: Should we Notify the Home Office?
The shift to hybrid working after COVID-9 had prompted many employers to continue to allow their employees to work from Home. For sponsored workers, this raises questions as to whether their work location would affect their immigration status, and whether an employer needs to inform the Home Office accordingly.
The UK Home Office policy requires an employer to inform them of any changes to a sponsored worker’s normal work location as per the Certificate of Sponsorship (CoS). It is crucial for an employer to notify the Home Office particularly where the work arrangement deviates from the original CoS. Whether a sponsored worker is transitioning to remote work on a permanent or part-time basis, or adopting a hybrid working pattern, it is mandatory to keep the Home Office informed via the SMS system.
According to the Sponsor Guidance, employers must notify the Home Office if:
- The worker is working at a different site, branch, or office of the organisation, or a different client site, not previously declared.
- The worker is working remotely from home on a permanent basis, with little or no need to physically attend a workplace.
- The worker has moved or will be moving to a hybrid working pattern.
- Attending one or more of the employers’ offices, branches, or client sites.
It is important to note that day-to-day changes in an employee’s work location, such as occasional visits to a different branch or working from home sporadically, do not require reporting to the Home Office. The focus of the guidance is to communicate changes to the workers regular working patterns to ensure compliance with the immigration regulations.
Failure to comply with the Sponsor Guidance including changes to a worker’s work location can result in compliance issues and in severe cases jeopardise the employer’s sponsorship licence and the workers immigration status. It is imperative for employers to prioritise adherence to their compliance obligations. Failure to comply with sponsorship duties can lead to legal repercussions.
In the era of remote work, employers must manage their obligations under the immigration system whilst accommodating the needs of their workforce. Effective communication and a collaborative approach between employers, worker’s and the Home Office underpinned by sound legal advice are essential for adhering to the complexities of UK immigration law.
Quastels Corporate Immigration team are highly experienced in advising on UK visa matters. If you have any questions arising from this article, do not hesitate to contact us at corporateimmigration@quastels.com
Statutory Excuses: How Can An Employer Protect Themselves Against Liability For An Illegal Working Civil Penalty?
Navigating the intricacies of employment law, particularly concerning immigration, can be challenging for any employer. However, ensuring compliance with right-to-work regulations is imperative to prevent civil penalty enforcement. This article outlines tips on how an employer can establish a statutory excuse against liability for illegal working civil penalties.
Comply With Right-To-Work Checks
- It is important for HR departments to be familiar with different types of right-to-work checks as set out by the Home Office. These checks can include a manual check, IDVT, or online. Knowing your options is imperative to maintain compliance.
- Consider utilising the IDSP (identity service providers) as this streamlined process can provide a continuous statutory excuse.
Maintain Records
- Maintain and store records of the right-to-work checks you have conducted. It is vital to retain clear copies of the documents throughout employment and two years after employment ends.
Set A Reminder And Follow Up
- If an employee holds leave with a time-limited right to work, ensure you diarise follow up checks are caried out before a statutory excuse expires. Failure to adhere to this requirement will result in liability of a civil penalty.
Maintain Your Knowledge
- Immigration rules and regulations are in a state of constant flux. It is important to keep abreast of the latest guidelines issues by the Home Office to ensure compliance.
Obtain External Support
- Experienced lawyers in Immigration & Employment law can provide tailored advice and ensure your HR departments and employees are provided with up to date training to prevent exposure to civil penalties.
- Establishing and pleading a statutory excuse against illegal working civil liabilities requires adherence to the protocols outlined above. Following the above tips employers can mitigate risks and ensure compliance with immigration laws.
The Immigration team at Quastels are highly experienced at advising on UK visa related matters. If you have any questions arising from this article, please do contact us at corporateimmigration@quastels.com
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