Welcome back to The Settlement Agreement Solicitor blog! I’m Geoffrey Caesar, a solicitor with over 20 years of experience specialising in settlement agreements, and today we’re discussing a topic that has recently come to the forefront for many workers in the hospitality and service industries: the new laws on tip allocation. These changes, which came into effect on October 1, 2024, bring a new level of fairness and transparency to how tips, gratuities, and service charges are distributed. But what happens if disputes arise over these tips? That’s where a settlement agreement can come into play.
What’s New with Tip Allocation?
The Employment (Allocation of Tips) Act 2023 is now in force, along with a statutory Code of Practice on Fair and Transparent Distribution of Tips. These new rules ensure that workers receive tips in full and that employers distribute them fairly. This legislation applies to both permanent employees and agency workers, so no one should be left out of the equation.
To help employers comply, the government also issued non-statutory guidance on September 27, 2024. This guidance provides practical tips on how to distribute tips fairly, including templates for tipping policies, records, and requests for tipping information.
Here are some of the key takeaways from the new law and guidance:
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Equal treatment of workers: Employers must treat all workers fairly when distributing tips, including agency workers. For example, if probationary staff receive a smaller percentage of tips, this policy can apply equally to agency workers, as long as it’s clearly outlined and fairly implemented.
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Tips must stay local: Employers can’t pool tips across multiple locations or branches. Tips must be distributed among workers at the site where they were received. So, if you’re working at a restaurant chain, tips collected at one branch cannot be shared with staff at another location.
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Who gets the tips? Employers need to be clear about which workers are entitled to a share of tips. Generally, this includes workers who are directly involved in providing customer service. For example, it might make sense to include a door porter in a fine dining restaurant but not a marketing manager.
The law also requires employers to have a written tipping policy and to maintain tipping records. Failure to comply can result in a complaint being taken to an employment tribunal.
How to Resolve Tip Disputes
Disputes over tip allocation can arise, even with clear laws and guidelines in place. The government’s guidance encourages employers and workers to resolve disputes internally, and if that’s not possible, employers can seek advice from Acas. However, if the dispute can’t be settled, workers have the right to take the matter to an employment tribunal.
If it gets to that point, workers must act within the time limits for making a claim, and remedies can include compensation for lost tips or a financial penalty for the employer.
How Can a Settlement Agreement Help?
This is where settlement agreements come into play. If a dispute over tip allocation escalates, a settlement agreement can be a quick and effective way to resolve the issue without going through the formal tribunal process. Here’s how a settlement agreement can help both workers and employers:
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Clarifying Tipping Policies
Sometimes, disputes arise due to confusion or a lack of clarity about how tips should be allocated. A settlement agreement can help clarify and document the employer’s tipping policy and provide a resolution for any past mistakes. -
Compensating Workers
If a worker has missed out on tips or hasn’t been fairly compensated, a settlement agreement can include a compensation payment to resolve the dispute. This ensures the worker is fairly treated without the need for further legal action. -
Maintaining Confidentiality
Settlement agreements often include a confidentiality clause, which can be beneficial for both parties. Employers may want to avoid negative publicity, and workers might prefer a private resolution to the issue. -
Preserving Relationships
Tip disputes can create tension in the workplace, especially if workers feel they’ve been treated unfairly. A settlement agreement allows both parties to move forward without further conflict, maintaining a positive working relationship where possible. -
Avoiding Tribunal Costs
Taking a dispute to an employment tribunal can be time-consuming and expensive for both sides. A settlement agreement provides a faster resolution, often with a payment made within 14 to 28 days, giving both parties closure and avoiding the stress of legal proceedings.
Conclusion
The new tip allocation laws are designed to create a fairer system for workers who rely on tips as part of their income. However, as with any law, disputes can arise. A settlement agreement can offer a quick, fair, and confidential way to resolve those disputes, avoiding the need for lengthy and costly tribunal claims.
If you’re an employer needing help drafting a tipping policy or a worker involved in a tip dispute, feel free to contact me. With over 20 years of experience in settlement agreements, I can guide you through the process and help you reach the best possible outcome.
Thanks for reading this post, and be sure to subscribe to The Settlement Agreement Solicitor blog for more insights on employment law and settlement agreements.
Until next time,
Geoffrey Caesar
The Settlement Agreement Solicitor
