Hospitality businesses urged not to fall foul of tipping rules

Hospitality business owners should comply with new legislation on tipping, or potentially face a hefty penalty, warn HR experts.

The team at Swindon-based HR Dept – which specialises in supporting the hospitality industry – says the rules also attempt to provide clarity around what is a grey area.

“We work with a large number of hospitality businesses, both here in the Swindon area and through our sister company in London,” said Peter Jones, Managing Director of the HR Dept Swindon, North Wiltshire and East Cotswolds.

“The Employment (Allocation of Tips) Act 2023 has significant implications for HR policies and procedures. Hospitality businesses must now implement processes to guarantee the full and fair allocation of all tips, gratuities, and service charges to their employees, with no deductions beyond tax and National Insurance.

“We are advising our clients that they must now follow the new rules, or they risk an employee taking them to a tribunal, which, if they lose, could result in a fine.”

Under the Act, employers must draw up a written tips policy (and their staff should be trained in and aware of the policy). They are also obliged to distribute 100% of tips and service charges directly, and fairly, to their employees. They also need to keep records.

Qualifying staff are entitled to bring a claim against a business in an Employment Tribunal if they believe the tips are not being distributed fairly, with potential penalties for non-compliance of up to £5,135 per employee. This comes as part of a raft of Employment Tribunal Compensation increases.

Although the new rules were introduced in October last year, it is from this April that they are being enforced.

Peter added: “Business owners also need to be aware that the legislation applies to agency workers as well as zero-hours workers, but not to those who are self-employed. So clearly, there are some complications, which our HR team can help with.”

The HR Dept has produced a comprehensive guide to HR for the hospitality sector, covering everything from recruitment and sick pay, to employee wellbeing and workplace safety. It also includes details of how to navigate the new tipping legislation.

Peter and his team work with businesses across the hospitality industry, including pubs and bars, nightclubs and private members’ clubs, restaurants and cafes.

For help with navigating HR legislation, and a copy of the guide, email Peter Jones at [email protected] or call 01793 683 398. For more information about the HR Dept Swindon, North Wiltshire and East Cotswolds, visit https://www.hrdept.co.uk/swindon-north-wiltshire-east-cotswolds/.