Understanding ‘Qualifying Tips’

The Act defines ‘qualifying tips’ as both employer-received and certain worker-received tips over which the employer has control or significant influence. For instance, service charges added to a restaurant bill are considered employer-received tips, while cash handed directly to a waiter is a worker-received tip. If an employer collects cash tips and subsequently distributes them to staff, these also fall under the category of qualifying tips.

Establishing Fair Allocation

Employers are obligated to allocate qualifying tips fairly among workers. The statutory Code of Practice on the fair and transparent distribution of tips provides guidance on determining fairness, considering factors such as the nature of the role, length of service, and customer intentions. Employers should consult with their staff to reach a broad agreement on the allocation method. 

Documentation Requirements

Once an allocation method is agreed upon, employers must draft a written policy detailing the process. This policy should be accessible to all employees. Additionally, employers are required to maintain a tipping record, documenting how each qualifying tip is handled. These records must be preserved for three years from the date the tip was paid. Employees have the right to request access to records pertaining to their own tips.

Exemptions and Obligations

Employers who do not exert control over employee tips are not mandated to have a tipping policy or maintain records. However, it is advisable to inform workers of this exemption. Employers who receive qualifying tips only on an ‘occasional and exceptional basis’ must provide a statement to their workforce explaining why a policy is not required. Regular receipt of tips, such as monthly, is unlikely to be considered ‘occasional and exceptional.

Compliance and Enforcement

Adherence to this legislation is crucial, as workers can file claims with an employment tribunal if employers fail to comply. Employers should review and, if necessary, revise their current practices and documentation to align with the new requirements, ensuring transparency and fairness in the distribution of tips.