Tipping changes you can’t ignore
The Department for Business & Trade (“DBT”) have now published their response to the consultation carried out earlier this year regarding changes to the statutory Code of Practice on Fair & Transparent Distribution of Tips. These updates sit alongside the changes to the Employment (Allocation of Tips) Act, legislated late last year as a part of the Employment Rights Act. Whilst the response is primarily concerned with the new employee consultation obligations there are two additional changes within the revised Code of Practice which are likely to prove significant stings in the tail for many operators.
Further “non statutory” guidance is expected to be published nearer to October to try and provide additional detail and clarity, with DBT committing to engage with stakeholders on the precise nature of this guidance.
Employee consultations
Firstly, DBT have provided more detail regarding the new employee consultations and how these must be carried out. As a reminder, consultation must now take place whenever a new tipping policy is introduced or, alternatively, at least once every three years. There is no definition of what degree of change to an existing policy will mean that a policy is, essentially, “new” and requires consultation as opposed to minor changes which will not need a consultation. Whilst this may be frustrating it would be impossible to cover every potential scenario in the Code.
The legislation in place already mandates that the consultations must be “genuine” and conducted via trade union officials where there are recognised unions in the workplace (which may become more likely following other Employment Rights Act changes due to take effect from October). Alternatively, they must be conducted directly with affected workers.
The consultation must be “proportionate to the size of the business”. Larger businesses may need a formal process involving staff representatives and ensuring that all trading sites (for a multi-site entity) are involved as well as different departments within those sites. Smaller single-site businesses may be able to consult through a single team meeting, for example. Whilst no minimum duration for the consultation is set out in the response, it must be for long enough that the consultation is genuine and allows all affected staff to have an input. Holding a consultation via survey and questionnaire will be acceptable.
The consultation is advisory, not binding on the business or a Troncmaster. There may be sound reasons why a Troncmaster might feel that acceding to the views of a numerical majority among their team would be unfair on other team members – for example, if front-of-house team members wish to retain all employer received tips in full and not share them with their back-of-house colleagues. However, where a business or Troncmaster departs from the majority view, they will likely need to explain why they believe their approach remains fair.
Employment Tribunal considerations
The response also guides Employment Tribunals to consider the overall impact of a tipping policy across the workforce, rather than focusing solely on an individual worker’s perception of fairness. This is a welcome statement as many businesses and Troncmasters will already be familiar with complaints and grievances (often AI-enhanced) that revolve around an individual worker not receiving as much as they feel they should, but where any reasonable person standing back and looking at the policy as a whole would deem it to be fair.
Transparency and agreement
The requirement for tipping policies to command “broad agreement” across the affected workforce remains.
Businesses are “encouraged” to share their tipping policies with customers. While there is little evidence that customers seek detailed policy information beyond reassurance that tips go to staff, businesses may wish to consider publishing the policy, or a summary, on their website.
Non-public places of business
The final changes will be, for some, the most consequential changes. Since 2024, legislation has included the concept of “non-public places of business” and that, where it is fair to do so, an element of employer received tips paid at a trading site may be attributed to workers located at that non-public place. Workers located at these non-public places can include chefs working in a centralised production kitchen preparing food for sale to customers at a trading site, and other staff directly involved in delivering the guest experience such as reservations and sales teams and other personnel involved with the food, service and standards of service, training teams and similar. Some of these team members may float between various trading sites according to where they are needed (being treated as “central” for administrative ease), and sometimes they are physically located in a separate Head Office or similar. If they are physically located at the trading site, they would ordinarily be eligible for a share of employer‑received tips.
The revised Code, effective 1 October, introduces a new definition stating that participation should “broadly be based on those involved in directly providing service at the place of business” and that “this usually means workers who, as part of their job, personally interact with customers or physically and personally prepare, handle, serve or otherwise provide the food, drink, hospitality or experience that the customer directly consumes or receives at that place of business”.
This means, it is likely that Head Office staff based at a geographically distinct location can no longer receive a share of any employer received tips generated at a trading site. Those workers may feel understandably aggrieved that their contribution and effort is, seemingly, not recognised and that they are being penalised for where they sit rather than what they actually do.
Fixed, minimums or guaranteed amounts
The final change concerns how tronc awards or tip allocations are made. Many operators include a fixed element to provide workers with visibility and certainty. However, in a valid tronc arrangement, fixed elements can never be guaranteed.
Paragraph 29 of the new Code states that “employers should exercise caution when considering arrangements under which a fixed, minimum or guaranteed monetary sum of tips is allocated to a named individual or category of worker in advance of distribution. Differences between allocations for different roles should arise from objective factors and the amount of tips received, rather than a pre-determined commitment to a fixed sum. Such schemes may be deemed unfair as they risk unfairly increasing the variability of tips for those workers who do not benefit from fixed or guaranteed monetary amounts”.
This is not a ban or prohibition on fixed awards but sets out that they should arise from “objective factors” linked to those roles rather than bespoke sums for particular individuals. It may be seen as unfair if some workers have the “certainty” of a fixed element to their award and others do not, and awards that are wholly fixed with no variation linked to tips received are more likely to be deemed unfair under the new Code.
Operators with fixed element in their awards will need to review these carefully to ensure they do not disadvantage parts of their workforce and may well wish to seek the views of their teams on this question as a part of consultation. But, without doubt, this has the potential to be a significant change for some operators.
Missed the mark
It is disappointing how few operators engaged with DBT. With over 130,000 hospitality businesses estimated to be affected, only 29 took the time to make submissions. In the absence of operators explaining what they do, why they do it, and how their teams view these practices, it is perhaps unsurprising that we again have a Code of Practice that may, in several respects, disadvantage the very workers it aims to protect.
Find out more
We will be holding a webinar for WMT Troncmaster Services clients on Wednesday 15 July at 09:30, where we will explain the changes in detail, outline their implications, and discuss the strategies and options available to operators. Invitations will be issued shortly via email.
If you are not yet a client and you would like guidance and insight on what this means for you and your business, please do get in touch with our team.
Source: Distributing tips fairly: revised statutory code of practice – GOV.UK
