The Employment (Allocation of Tips) Act and the statutory Code of Practice have introduced changes designed to make tipping practices more transparent and standardized across hospitality businesses.
As of October 1st, a new law requires hospitality businesses across the country to record and distribute all service charges and tips received from customers directly to their workers, whether in cash or by card. It is now illegal for employers to withhold tips from workers.
While cash tips were already protected by law, this new legislation goes further to cover card payments in an increasingly cashless society.
It also mandates that tips must be allocated fairly among all workers, including those on zero-hour contracts.
Speaking to Londra Gazete, Freddie Wells from Payroll As You Go highlighted why it is so important for businesses to comply with the new rules: “If a company does not follow the new rules or cannot provide records to its workers when asked, it could face fines of up to £5,000 per worker. Workers have 12 months to bring a claim through an employment tribunal, and once an investigation starts, HMRC could look at other employees at your company. If you’re found non-compliant, you could face a £5,000 fine per worker.”
When asked about the necessary process, Wells explained, “A written policy needs to be put in place. Every business is different, and we can help you create a tailored policy, whether you’re a restaurant, hairdresser, café, or part of the hospitality sector. We’ll help you develop a policy that best suits your company.”
However, it doesn’t end with creating a policy. “Employers need to ensure the policy is given to all their workers, and they must keep records of all tips and service charges received. They are required to pass the full amount of tips to their workers, except for tax and National Insurance deductions; bank or card charges cannot be deducted.” she added.
Payroll As You Go offers services to guide clients in complying with the new legislation. Freddie and the expert team are dedicated to helping clients avoid any issues with the new rules.
The hospitality sector is vast, and Payroll As You Go understands that this process needs to be tailored for each company. Your policy needs to work for your business, with guidance on how to accurately record and distribute tips or service charges within the legal period, as required by the specific needs of each hospitality business.
“We’re here to help you,” reassured Wells, giving you peace of mind that everything will be prepared and compliant. Call their office at 02037255911, email info@payrollasyougo.com, or send a WhatsApp message to 07981128868 for more information.
