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Preparing Your Business For The Employment (Allocation of Tips) Act 2023
The landscape of tipping and service charges in the UK is set to undergo a significant transformation with the introduction of the Employment (Allocation of Tips) Act 2023 later this year.
This legislation aims to eliminate uncertainties surrounding the allocation of service charges and other tips, ensuring that employees receive their due share.
In this article, we delve into the current system and the forthcoming changes that businesses in the leisure and hospitality sectors should be aware of.
Current System: How Does It Work?
At present, “tipping” typically encompasses both tips (whether in cash or card) and service charges, which can be discretionary or mandatory. When customers give cash tips directly to staff, these tips essentially become the property of the employee. While their employment contract may stipulate otherwise, it is generally up to the individual to decide whether to share these tips with colleagues.
On the other hand, when tips and service charges are collected by the employer—whether through a tip jar on the counter or a 12.5% service charge added to the bill—the distribution methods can vary. These range from the employer determining the allocation of tips and service charges to the staff members themselves agreeing on the day’s distribution of cash tips.
Additionally, many businesses put in place a “tronc” system, being a mechanism which allows tips and service charges to be pooled and distributed among staff by a designated “Troncmaster” without direction from the employer. It is worth noting that the chosen method of collection and distribution carries tax and national insurance implications, which will not be covered in this article.
Currently, there are no restrictions on businesses deducting amounts from the collected tips and service charges before distributing them to staff. While there may be valid reasons for such deductions—such as the operational costs of administering a tronc scheme—media attention has increasingly focused on employers making significant deductions from service charges, particularly as around 80% of UK tipping now occurs via card payments.
Five key changes Under the Employment (Allocation of Tips) Act 2023 are as follows:
1. Prohibition of Deductions
Under the new legislation, businesses will no longer be permitted to make deductions from the tips and service charges collected. Every penny collected must be distributed to the staff, with deductions only permissible for tax or as otherwise authorised by law.
2. Obligation To Allocate Tips Fairly
Businesses will be obligated to allocate tips and service charges “fairly” among workers. Although the legislation does not specify what constitutes fair allocation, this is expected to be clarified in due course. Employers will be required to have a written policy outlining the fair, transparent, and consistent distribution of tips.
3. Time Limit For Payment
Tips and service charges must be paid to eligible workers no later than the end of the month following the month in which the tip or service charge was received.
4. Record-Keeping Requirements
Employers must maintain records of the allocation and distribution of tips for a minimum of three years from the date they are received.
5. Right To Claim In Employment Tribunal
Employees will have a separate right to bring a claim in an employment tribunal if there is a breach of these requirements. The tribunal may, among other remedies, order compensation of up to £5,000 to an affected employee to compensate for any losses suffered.
Final Comments
The implications of these changes are significant, particularly for employers in the leisure and hospitality sectors. With businesses already facing financial challenges, the additional administrative burden of distributing tips and service charges could strain resources. One alternative may be to pass these costs back onto customers, but this is unlikely to be popular in the current economic climate.
In light of the forthcoming legislation, it is prudent for businesses to start implementing the necessary policies, structures, and procedures now. By doing so, businesses can be better prepared to comply with the new requirements and ensure compliance from the outset.
To discuss any of the points raised in this article, please contact Adam Convisser or fill in the form below.
The New Duty on Employers to Prevent Sexual Harassment
The Worker Protection (Amendment of Equality Act 2010) Act 2023) is coming into force in October 2024 and places a new duty on employers to take action to prevent sexual harassment in the workplace.
In summary, the new law:
- Introduces a duty on employers to take reasonable steps to prevent sexual harassment of their employees.
- Gives the Employment Tribunal power to uplift compensation by up to 25% where an employer is found to have breached the new duty to prevent sexual harassment.
This duty will apply to employers irrespective of the size of the business or the number of staff (although a tribunal will take the size and resources of an employer into account when assessing what is considered `reasonable’).
What Is Sexual Harassment?
Sexual harassment is defined in section 26(2) of the Equality Act 2010 as:
“unwanted conduct of a sexual nature that creates an intimidating, hostile, or offensive environment for the person on the receiving end and/or violates their dignity.”
There are a variety of incidents and behaviours that might constitute sexual harassment, but some obvious examples include:
- Making sexually suggestive comments.
- Altering a pornographic image by adding a picture of a colleague’s head, then sending it to other co-workers.
- Touching someone in an inappropriate or unwanted manner, e.g., pinching someone’s bottom.
The Employment Appeal Tribunal has held that what constitutes sexual harassment is subjective, and there does not need to be a series or number of incidents – a one-off incident may be enough to constitute harassment:
The law does also not require the potential victim to have made it clear in the past that the sexual conduct was unwanted. In Insitu Cleaning Co v Heads [1995] IRLR 4, the EAT stated that would-be harassers could not be allowed to “test the water” without consequence to see whether their conduct was objectionable to the receiver(s) if their behaviour is serious enough to reasonably constitute harassment.
What Is The New Duty On Employers?
Employers are required to take “reasonable steps” to prevent sexual harassment of workers in the course of their employment.
The current law already provides a defence to a harassment claim if the employer can show they have taken all reasonable steps to prevent sexual harassment from happening. However, the new law places a legal obligation on all employers to take proactive measures to prevent sexual harassment in the workplace.
It is important to note that this law does not only protect women but applies equally to people of all genders.
What Constitutes “Reasonable Steps”
There is no guidance on this in the new law. The employer’s defence in the Equality Act uses similar wording – that the employer took “all reasonable steps” to prevent the discrimination or harassment. The word “all” has been removed from the new legal duty, meaning this may be a lower threshold. However, employers should be aware that it is likely that Employment Tribunals will interpret the duty in a similar way to the employer’s defence under the Equality Act 2010.
Policies Alone Are Unlikely To Be Enough
A recent Employment Tribunal decision in Fischer v London United assessed what would be expected of an employer to make out the “all reasonable steps” defence. The employer in this case had appropriate policies in place, however, they had failed to take other steps such as keeping the policies up to date, making them available to all staff, and implementing regular training.
Compensation
A worker can only claim that the employer has breached this new duty of taking reasonable steps as part of a wider claim for sexual harassment. They cannot bring a free-standing claim.
If an employee succeeds in a claim for sexual harassment and the employer is found to have breached its duty to take reasonable steps to avoid the sexual harassment, the Employment Tribunal has discretion to uplift the compensation payable to the worker by up to 25%. Although this uplift can only be applied in a successful claim for sexual harassment, the uplift will apply to all of the compensation that has been awarded including that for any other type of harassment that has also been added as part of the tribunal claim. A failure to take reasonable steps’ therefore can become very costly for an employer.
What About Harassment Of Staff By Third Parties?
The new duty to take reasonable steps does not extend to taking steps to prevent third-party harassment. However, employers are still at risk of discrimination claims or claims of harassment itself if complaints from workers about harassment by third parties are ignored. Additionally, there is a significant risk of damage to reputation if an employer fails to prevent staff from being harassed at work.
What Next Steps Should Employers Take?
We recommend the following steps be taken over the coming months to comply with upcoming new legal duty to prevent:
- Have a separate sexual harassment policy detailing a non-exhaustive list of behaviour that might amount to sexual harassment and incorporating a speak up policy to ensure staff feel safe to report incidents of sexual harassment.
- Ensure your reporting systems for harassment incidents are fit for purpose and allow you to identify patterns, for example, a particular activity, such as a sales conference, which always results in harassment complaints. When creating the complaints register, make sure it complies with data protection rules.
- Update and roll out harassment training to all staff, ensuring line managers understand how to deal with complaints and employees know what constitutes harassment so they can avoid committing it.
- Place signs in areas where third parties such as customers, contractors, and suppliers encounter employees, stating that threats, violence, and harassment will not be tolerated.
- Conduct targeted risk assessments regarding situations or events where there may be a higher risk of sexual harassment and put in place measures to eliminate risks or mitigate them (if the former cannot be achieved).
To discuss any of the points raised in this article, please contact Dipti Shah or fill out the form below.
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We want you to WANT to be here – Employees Quietly Quitting
Employee engagement is a real concern for employers.
While it is probably not a new concept, there is now a label for employee disengagement and apathy known as ‘quietly quitting.’
This is a state where employees do the job they are employed to do with no problems or concerns however, they are emotionally detached from any ambitions for the company, its success, growth or development. They simply ‘clock in’ and ‘clock out.’
Why Are Employees Quietly Quitting?
You might wonder, what’s wrong with that? They’re doing the job and not causing any issues so why is this a problem?
Perhaps there isn’t, if as an employer, you have no sustainability goals for the company, do not wish to attract stakeholder investment, develop your brand or strive for larger market share.
With the digital age and an exponential increase in competition for market share, it is now more important than ever to have ‘buy in’ from employees so that they are committed to the aspirations and objectives of the company , wanting to want to be there and participate in its growth and success.
How Quiet Quitters Affect Long Term Business Goals
There is nothing to stop employees quietly quitting. As they would not be underperforming or misbehaving there would be little cause for HR intervention.
However, the quiet quitters pose a significant risk to employers by their failure to engage and participate in meeting the long-term goals of the business. Their stagnancy results in a lack of creative input, foresight and innovation.
It can also lead to low team morale where their disinterest waterfalls into the attitudes and behaviours of their teams perhaps even seeing enthusiastic individuals leave and move on to somewhere else.
How To Keep Your Employees Staying
Employers who want their employees to want to be there may give some consideration to the following:
- What are the values of the company and is this mirrored in the type of culture that exists?
- Are employees disengaged because they feel adrift from the mainland where decisions are made on assumptions of what employees want or need?
- How is employee appreciation expressed? If you want employee commitment and investment, how are you investing in them?
- How are you building trust with your employees? Employees who are emotionally invested will bring more to the table. Trust develops a good faith commitment and for the most part, people like to deliver their part of the bargain.
Rounding Up
Companies frequently spend thousands of pounds in developing brand image and in marketing their products and services. However, where there is a culture of quiet quitting inherent in the spine of the company, such investment is futile if your employees, who are the engine of the company, feel uninspired and unenthused to take relevant action towards achieving the company’s ambitions.
To discuss any of the points raised in this article, please contact Dipti Shah or fill in the form below.