Tipping bill: What does the new law mean for your hotel?

October saw a monumental change in the way hospitality workers get paid as the new Employment (Allocation of Tips) Act came into effect on 1^st October (2024).

The new law will ensure that workers receive 100% of their tips from cash, cards and added service charges. Government officials say that this change will give back over £200 million to staff, placing workers ‘at the heart of the economy.’

So, what do hoteliers need to know about this ground-breaking new law?

1. Building trust

Research shows that over 80% of tips were made via card in 2021, with customers not aware of whether their tip would be paid to their server or not.

Tipping transparency will help to build trust between guests and hotels, with customers now understanding that hard-earned tips will be taken home by staff members.

Likewise, customers will start reaping the benefits through an improved guest experience as staff are more encouraged and motivated as they start to feel the financial benefit tipping brings.

2. The code of practice

Before the 1^st of October, all tips made on credit or debit cards or the discretionary service charges on bills could be legally kept by the hotelier. Now, the new act states that all tips are to be passed on to staff without deductions. However, the accompanying code of practice states that tips do not need to be equally distributed between staff if there is a valid reason.

Despite this, it is recommended that management discuss a fair policy with their team and come to a rational agreement on how tips are distributed. This may consider hours worked, job role (housekeeping, waiting and bar staff, kitchen staff etc), or position (manager or junior), however, it is essential that hoteliers’ distribution of tips is seen as fair and not discriminatory.

If a hotelier uses a Tronc to distribute tips, the management must ensure this nominated person follows the code of conduct set out and agreed by all employees.

3. Be aware of legal implications

The Allocation of Tips Act states that if an employer violates the law, employees will be able to bring a claim to an employment tribunal, with costs estimated up to £5,000.

If a worker believes they are being unfairly treated when it comes to tips, the tipping code of conduct is discriminatory or that they are owed more tips than what is allocated to them, their claim will hold up in court.

4. The start of more change for employers

The King’s Speech in July discussed the new Labour Government’s radical changes to employment law, as it begins to deliver its ‘new deal for working people’ over the next four years. This tipping law is the start of an overhaul to workers’ rights, which is set to include the Employment Rights Bill that was introduced in parliament on 10^th October to ‘make work pay’ and introduce fairer rights for workers in the UK.

With Labour’s drastic plans in action, hoteliers must be vigilant to the changes over the coming months and years to remain compliant. Hoteliers will likely be affected by changes to laws regarding unfair dismissal, zero-hour contracts, sick pay, gender equality, flexible working and more.

In summary, if hotels are compliant and have solid, fair tipping conduct in place, this new legislation will empower workers and level the playing field for hospitality businesses.

As staff members feel more appreciated and see the financial benefits of their hard work, the service on offer at hotels will also improve, further enhancing the customer experience and therefore, boosting revenue.