On 15th July 2022, the Government gave backing to The Employment (Allocation of Tips) Bill (the “Tip Bill”) meaning it is more than likely we will see new Legislation in the not-too-distant future surrounding customer tips to your staff.
The Tip Bill looks to secure a fair deal for workers and act on unfair tipping practices by making it unlawful for employers to withhold tips from staff.
Presently, whilst the Government has issued a Code of Best Practice, employers are not compelled to follow this and there is currently no legal basis to oblige employers to pay tips to their staff. It should be noted that this position may differ if there is an express agreement to the contrary in the employment contract.
The Tip Bill will benefit more than 2 million workers by making it unlawful for employers to withhold tips that it receives for staff and will give workers the right to see their employer’s tipping records.
It is also worth reminding ourselves that tips may still be subject to Income Tax and National Insurance deductions and an employer cannot count tips towards the calculation of the National Minimum Wage, otherwise there could be a further risk of a claim of unlawful deductions.
It is expected that employers who continue to withhold tips from their staff should expect to find themselves before an Employment Tribunal. Under Section 13 of the Employment Rights Act 1996, employers cannot make a deduction from employees’ wages unless:
- The deduction is authorised by law (i.e. an Income Tax or National Insurance deduction);
- The deduction is expressly authorised by the worker’s contract; or
- The worker has consented to the deduction, ideally in writing before it is made.
Though typically the type of deduction an employer expects to make will be around monies owed to the company from a loan to an employee, unlawful deductions claims can arise in a number of ways. For example, a shortfall in holiday pay, a failure to pay the appropraite National Minimum Wage and soon, a failure to pay tips that have been given to the employee.
Though there are certain exceptions to these rules, if an employer makes a deduction without the right authorisation, the employee has the right to pursue a claim for unlawful deductions from wages, which can be costly and time-consuming to your business.
Many employers will have adopted a practice which has meant staff have not received tips and will be left wondering what this new Bill might cost them.
Claims for unlawful deductions must be brought within three months (less one day) from the date of the last deduction from wages. This can mean if there has been a practice of making unlawful deductions and there is not a gap of three months between deductions, an employee could potentially make quite a substantial claim. There is some (albeit small) relief to employers here as, for the most part, a Tribunal can only consider unlawful deductions from wages made within two years before the date of the claim.
We have seen that the Bill shall entitle staff to access their employer’s tipping records which will no doubt be essential evidence for those pursuing a claim. What is unclear is whether this new access will be a right for back-dated claims and how this may work in practice.
As a starting point, we recommend our clients include a carefully drafted clause in their staff contracts authorising the company to make deductions from staff wages.
This broadcast covers just a small snapshot of the provisions surrounding deductions from wages and it is important an employer considers each scenario on an individual basis. We therefore recommend that you always contact your HR Advisor here at Stallard Kane Ltd to receive the best advice and ensure your business makes the right move before a deduction is made.
If you need help with any employment law matter, contact your designated advisor or, if you don’t currently work with our HR team, give them a call on 01427 420 403 or email email@example.com