1 October 2024 marks a significant change in the hospitality sector with the introduction of new tipping legislation designed to ensure fairer distribution of tips across the workforce.

Whilst there will almost certainly be bumps along the road as businesses get to grips with the new rules, we do think that a positive aspect of the act is a move towards greater transparency when it comes to tips.

Exceptional customer experiences are made possible by the hard work of many individuals - including permanent employees and agency workers.

The act's inclusion of agency workers (including casual workers) when it comes to tip distribution is a step forward in valuing the hard work done by those workers but does create lots of additional work and questions for employers to answer.

Our recruitment and staffing consultants have been hard at work assessing what this means for those who use a hospitality staffing agency to bolster their teams.

Why is new legislation being passed?

As many of our operational and client facing teams come from a background of events and hospitality, we know all too well that tipping practices across the industry have historically been, well, a little inconsistent.

The government's guidance notes for the new act states that the desired outcome of the Act is to "improve fairness for workers" by making sure that tips left in recognition of good service and hard work go to the workers as intended.

Crucially, the legislation aims to level the playing field in how tips are shared, and in how the process is communicated to workers.

It’s a way to acknowledge that every role – whether permanent, part-time, or agency-based – contributes to the customer experience.

For employers, it's a chance to build trust, boost staff morale, and create a genuinely fairer working environment.

Key Takeaways: What You Need to Know

1. The new tipping law comes into force from 1 October 2024 across England, Wales, and Scotland.
2. 100% of qualifying tips must be allocated to workers (including agency workers and casual workers) – with no deductions for admin charges or other costs.
3. Fair and transparent allocation is essential, following the statutory Code of Practice.
4. A written tipping policy is mandatory and must be accessible to all workers, even if the workers are scheduled ad hoc in an irregular manner.
5. Employers must maintain records of tip allocation for three years to ensure transparency.

How does the new legislation work?

The rules apply to all qualifying tips, gratuities, and service charges received by:

• Employers: Tips paid via card or other means directly to the business or associated parties.
• Workers: Tips paid directly to staff but still under employer control or influence.

For example, let's say you run an events company and have a policy that any cash tips given to front of house staff are pooled so that they can be split between front of house and back of house workers.

This means the tips fall under employer control or influence and so would be covered by the act.

In essence, all forms of tips – from service charges to cash left on tables – fall under this legislation if the employer plays any role in their distribution.

Even non-monetary tips like vouchers or tokens are included if they meet specific conditions.

What does this mean for employers using agencies?

If you regularly use agencies to meet staffing needs, this section is for you.

Again, the government's guidance notes are essential reading.

It states:

"Employers are obliged to take into account agency workers when considering the distribution of tips."

This means agency workers must be treated the same as direct employees in terms of tip allocation.

Section 19 of the Code of Practice goes into more detail:

"19. In the case of agency workers, any references to “employer” refer to the hirer for this engagement that is the place of business where they are working, even where their contract of employment is with an employment agency.

After the hirer has made the payment of tips to an employment agency, the agency is responsible for passing this on to agency workers, without unauthorised deductions."

Here’s how it works:

• Agency workers and casual workers must be included in the tip distribution like your permanent staff.
• Timely payment is crucial: Employers must pass tips to agencies by the end of the following month after the tips were received. The agency then pays the workers by the end of the next month.
• No extra deductions allowed: Neither the employer nor the agency can deduct fees from the tips allocated to workers.

Practical Steps for Employers

Create or update your tipping policy

This is a vital step, and we've been working with clients to ensure that we have copies of their policies on file, ready to be shared if needed.

If you haven't got a written policy in place, you should go through the government guidance notes carefully (possibly with the assistance of your legal advisor) to work out where the act applies to your business.

Next, get a written policy drafted so that you are in line with the new legislation.

Engage with your staff

As the act itself does not set out what is "fair" in terms of distribution, an open and honest discussion with your team might be a good step to ensure that everyone is on the same page.

“Staff support and agreement with a method of distribution needs to be genuine and not coerced by managers or employers,” states the tipping code of practice.

The Code lays out some factors which employers "may" wish to consider when creating their policy.

a. Type of role / work for example distribution between front of house and backroom workers

b. Basic pay (and how workers are engaged)

c. Hours worked during period when tips are received

d. Individual and/or team performance

e. Seniority / level of responsibility

f. Length of time served with the employer

g. Customer intention

All of these combined create a myriad of different options in how tips for an event or service could be delivered.

Due to this, it's important to keep your team up to date on your approach to distributing tips.

If you use agency workers or casual workers then liaising with your account manager is crucial. Share your current policy with them and discuss how this policy can be made accessible to workers booked on for your events.

In our case, we've built a functionality so that links to a client's policy can be included in the confirmation of work sent out to our team.

Consult with both permanent and agency or casual workers to ensure your policy feels fair and transparent.

Maintain accurate records

Keep detailed records of how tips are distributed and be prepared to provide this information if requested.

The act says that you need to keep these records for three years from when the tip was distributed.

Review your tronc system (if applicable): Ensure it complies with the new rules and includes agency or casual workers.

What Happens if You Don’t Comply?

With the new act in law, workers now have the right to:

• Request tipping records to verify their share.
• Bring claims against employers if tips haven’t been allocated fairly or within the required timeframe.
• Seek compensation of up to £5,000 for unfair practices.

Agency and casual workers also have the right to bring claims if their tips aren’t passed on correctly.

Final Tips for Employers Using Agencies

• Review your tipping practices to ensure they align with the new legislation.
• Clearly communicate your tipping policy to all staff, including agency and casual workers, so everyone knows how tips are managed.
• Work closely with your staffing agencies to ensure they understand and follow the new requirements.

The new tipping legislation isn’t just a regulatory change – it’s an opportunity to demonstrate fairness, transparency, and respect for the hardworking individuals who make your business thrive.

By staying ahead of these changes, you’ll not only comply with the law but also foster a culture that values every member of your team, whether they’re full-time, part-time, or agency based.