Draft Tipping Code of Practice published; legislation to take effect from 1st July 2024
18/12/2023
After a delay of some 6 months the Department of Business & Trade (“DBT”) have now published their draft Code of Practice to accompany the Employment (Allocation of Tips) Act passed earlier this year by Parliament. The legislation is now confirmed to be coming into effect from 1st July preceded by a 10 week public consultation.
The Code confirms the key points set out in the legislation remain unaltered but provides significant clarity on the principles of “fairness” and “transparency” which will be helpful for businesses. There is considerable flexibility within the Code and it is pleasing to see that Government has resisted calls from some to micro-manage or standardize the way in which tips can be allocated. For a sector with a hugely diverse range of operators, this is important.
Summary
The fundamental principles of the Code can be summed up as follows:
- There must be a written policy setting out certain details and everyone must have a copy of it
- Workers should understand how their own award is calculated and what the factors are that may affect it
- Those factors must be clear and objective, fair and reasonable, and visible.
- Workers are entitled to ask for details of how much funds are generated and their own award, but not how much has been paid to their fellow workers
- There should be broad agreement from teams on how funds are allocated
- In addition to the National Insurance exemption a tronc provides an automatic presumption of fairness, provided that an employer does not become aware that the tronc is being managed unfairly
Fairness
Much emphasis is placed on the employer’s Tipping Policy, ensuring that this is clear and straightforward, and that all workers (including agency workers) have a copy of this policy. Indeed, the Code says that “an employer cannot be said to have met its obligations to handle tips fairly and transparently if individual workers are not aware of their entitlements in line with the tipping policy”.
Government is clear that employers are not required to “allocate the same proportion of tips to all workers” and may use a “clear and objective set of factors” to differentiate between workers, including factors such as job role, basic pay rate, performance, length of service and seniority. The key is that these must be fair, understood by the worker, reasonable, applied consistently and non-discriminatory.
Employers should consult and obtain genuine “broad agreement” from their workers without coercion, although the draft Code does not dictate what form that consultation must take. Practices and policies must be kept up to date and reviewed regularly.
Transparency
The Code reiterates the information that must be contained within the written tipping policy and the rights of workers (including agency workers) to have that policy. Workers will also be able to request further details such as the amounts of funds generated at a place where a worker is located. The Code confirms that the Data Protection Act applies to tipping records and that staff are not entitled to ask for the details of specific amounts paid to other workers.
Businesses may share their tipping policy with customers, but this is not a requirement of either the Code of Practice or the underlying Act.
Troncs
The draft Code confirms the automatic presumption of fairness applied to independent tronc arrangements, but says that if an employer becomes aware that the manner in which a tronc is managed is unfair then they have an obligation to address this or else that automatic presumption will be lost and workers will, in that scenario, be able to bring claims to (firstly) ACAS and then an Employment Tribunal.
