In certain sectors across the country workers rely on the tips or gratuities left by satisfied customers to supplement their earnings. The use of cash for such payments has, however, been overtaken by electronic means (i.e. debit/credit cards and smartphones). This has meant less certainty for customers that gratuities – intended to reward good service – have reached the employees concerned, and no real guarantee for employees that such payments are being fairly distributed and not retained by the company.

In response to this the Government have created legislation in the form the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 which comes into effect on 1st  December 2022. It will place an obligation on employers to ensure fairness and transparency in how cash and electronic tips and gratuities (including mandatory service charges) will be treated.

Important steps employers will need to take to comply will include:

  • provide statements to employees and contract workers which set out how tips, gratuities and service charges will be distributed, the total of such payments received for the period covered and the amount being distributed to the employee.
  • ensure that tips and gratuities received electronically are passed on to individuals via payroll (note all tips and gratuities must be in addition to the rate of basic contractual pay).
  • display information for customers and employees on how tips and gratuities will be treated
  • be transparent about the level of any payments retained by the business to cover reasonable costs and the factors used to determine how tips and gratuities will be distributed (eg value of sales generated, number of hours worked, etc)
  • place posters on site explaining the new process for employees and also for contract workers

If you need help to get to grips with these changes and to put new appropriate arrangements in place, get in touch with us at HR Duo.

We are hosting a free webinar on Nov 23rd at 10.20 to explain the implications and answer any questions you might have.

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