Fit for the Tip? | New Legislation

Only 5% of Private Members’ Bills (legislation proposed by individual MPs, not the Government) ever become law. They’re not deemed particularly important and therefore receive less attention from the parliamentary lawyers who draft legislation.

Hence, it was unsurprising that the MP for Anglesey (Ynys Mon), Virginia Crosbie’s ‘Tips Bill’ contained a fair few anomalies. When it received cross-party support and, ultimately, ‘adoption’ by the Government, one might have expected they’d be ironed out by the subsequent Code of Practice and non-statutory guidance. If only!

So, what’s the issue?

We now have an Act of Parliament, a Code of Practice and (three days before the legislation went live) six pages of, thrown together, non-statutory guidance. Some documents conflict within themselves, or with one another. To add to the confusion, ACAS has produced its own guidance, too.

And nowhere is there any mention of the long-standing HMRC guidance (E24) Tips, Gratuities, Service Charges and Troncs. Many assumed the non-statutory guidance was delayed by a major overhaul of E24’s twenty plus pages of useful guidance. I wish!

What you need to consider

You’ll see plenty of legal commentary about the new legislation. But there is very little about its anomalies and contradictions. So here’s some to think about:

What is a ‘non-public’ place of business?

The legislation and code of practice states tips are to be distributed fairly in respect of each place of business. So that’s straightforward – each bar, restaurant etc. Or is it? Because there’s a clause that talks about ‘non-public’ places of business. If you work at a ‘non-public’ place of business you can apparently be enjoined with the tipping regime at a ‘public’ place of business. And the definition of ‘non-public’ place of business? Section 27E of the legislation advises a “non-public place of business means a place of business that is not a public place of business”. Obvious really!

When the non-statutory guidance appeared at the start of October 2024, it provided the example of ‘Jessica’ a Marketing Manager for a group of restaurants whose office is co-located at a restaurant site. Is that a ‘non-public’ place of business? Because she doesn’t interact with customers, “It would likely not be permitted for Jessica to receive a share of tips collected by the restaurants, as she is not directly providing service to customers.” So what are ‘non-public’ locations? Who do they include/exclude?

Seniority as a factor

Let’s push this along further. The Code of Practice says, “Allocating and distributing tips fairly does not necessarily require employers to allocate the same proportion of tips to all workers.” It suggests that seniority and level of responsibility are appropriate factors. So if ‘Jessica’ was an Area Manager whose office was over a company’s bar, and occasionally she assists a customer, does her level of seniority/responsibility mean she should receive more tips, fewer, or none whatsoever?

Discrimination

The Code of Practice cautions employers to avoid any form of unlawful discrimination when selecting and applying factors for allocating and distributing tips. But some factors could prove problematic. Some might argue seniority suggests a lesser (if any) entitlement. Or is it greater? What if senior staff are male and more junior staff female? If length of service is a factor, will there be age discrimination arguments if older, long service staff get more than young, temporary university students?

The Code of Practice says worked examples to avoid discrimination “can be found in the accompanying non-statutory guidance to this Code”. Except that they aren’t!

Customer intent

Another factor suggested is “customer intent”. Although each organisation must produce a policy for staff, there is no obligation regarding customers. So how do you measure customer intent? The Republic of Ireland introduced its own tipping legislation two years back. It requires policies for customers and staff. Where a customer tipping policy is not displayed in Ireland, you can incur a 500-euro fixed penalty!

The ‘tipping policy template’

The non-statutory guidance includes a ‘tipping policy’ template. It doesn’t say it’s ‘model’ wording but, as non-statutory guidance, it must be. It runs to thirteen lines and four of those lines contain just one word. A fifth contains two! It’s worse than useless.

One of the things it sets out is “For each day, tips are divided equally between front of house staff and back of house staff”. How does that reflect the factors in the Code of Practice? A decent tipping policy will be crafted carefully, have regard to legislation, code of practice, and likely run to two or three pages.

Another gem from the tipping record template is “There are 25 eligible employees, and [name of worker] received a 1/25 share of £100.00. This was paid to them on 27 February, as part of February payroll.” Beyond amazingly efficient payroll, what factors have been considered when everyone appears to get the same?

And finally, the sample template states “All cash tips are retained by the workers who directly receive them from customers”. Legally, that’s correct. I hand a waiter £10 cash. That’s a contract between me and the waiter. But what if I’ve been served by several people and leave it on the table? And the model template doesn’t prompt employees to declare cash tips to HMRC.

Moving forward

These are just sample issues. Unless there’s a rapidly updated version, it appears employment tribunals and higher courts will eventually decide what the legislation means. Considering implementation was delayed three months, one might have expected better employer guidance. Instead, you’re again left desperately trying to sort it out yourselves.

What can Moorepay do for you?

Given the legislative anomalies and contradictions it can be hard to understand the implications and comply with the new act. This is where our HR Policy Consultants come in.

How they can help

• Tailored HR risk assessments and tipping policies
• Legislative compliance, ensuring any policy suitably dovetails with employment law and staff terms and conditions.
• Where a TRONC provider has provided a generic model policy, review and suggest rewording if necessary to align with staff terms and conditions.
• Check existing policies, procedures and practices remain legally compliant and fit for purpose.