Azets Aberdeen, a leading provider of financial and strategic advisory services, is ensuring companies in the North-east of Scotland are prepared for a policy change which will affect how tips and service charges are handled.
Tipping is widely expected in settings like restaurants, hotels, and bars and plays a significant role in supplementing service staff income. As the city prepares for ‘Aberdeen Restaurant Weeks’, it is a timely reminder for local hospitality venues to be legally compliant for the changes coming into effect in October.
From October 1, 2024, the Employment (Allocation of Tips) Act 2023 will be introduced to protect employees' and workers’ tips and service charges across all sectors.
The new rules make it illegal for employers to withhold any tips, and requires businesses to ensure fairness and transparency when dividing tips amongst workers. The desired outcome of the Act is to improve fairness for workers by ensuring that tips given in recognition of good service and hard work are going to the workers, as intended.
Frazer Nicol, head of tax at Azets Aberdeen
Azets Aberdeen head of tax Frazer Nicol said: “Tipping is a customary practice within the hospitality industry. The new Act coming into force will be welcomed by employees, especially those working in the vast array of hospitality outlets within the area. We want to ensure businesses in our local community are well–prepared for the change ensuring they can look after their staff’s interest and maintain compliance.
“Under the new Act, employers must, as a minimum, allocate tips fairly and transparently, have a written policy on how tips are allocated to workers and distribute 100% of tips to workers by the end of the month that they were received. Failure to comply with the Act can result in fines, which we want businesses to avoid.”
If a worker raises a concern that the allocation of tips and gratuities is not fair or feels that they are being discriminated against, whether deliberate or not, they are able to raise a claim with the employment tribunal which, if successful, could result in compensation payable of up to £5,000.
As this new change falls within employment law legislation, the risk will solely sit with the employer. This explains that the risk cannot be discharged to a third party such as a Troncmaster - someone appointed by a business to be responsible for sharing tips to staff via a tronc scheme. A tronc scheme is a pay arrangement which allows hospitality and leisure businesses to fairly share tips and service charges given by customers to staff.
Frazer continued: “We are welcoming any business that may have concerns about the new Act to get in touch with us at Azets. We have a dedicated Employer Solutions team available to help guide businesses through the new legislation, assist with documenting the written policy, help to communicate any changes with employees and, if required, we can assist with the implementation of a Tronc scheme. We are committed to helping businesses navigate complex market conditions and achieve sustainable growth.”