Employment (Allocation of Tips) Act 2023 and status

We’ve previously posted a series of blogs outlining the changes introduced from 1 October 2024 by the Employment (Allocation of Tips) Act 2023. One element that we discussed is that there now needs to be a fair allocation of 100% of the tips received between all ‘workers’.

An often-overlooked point that could cause issues, is that whilst for the purposes of this act agency workers are applicable workers, self-employed individuals are not. The following example illustrates how this might be an issue.

You run a busy restaurant and, due to sickness, you need an additional member of front-of-house staff.

Your local agency is unable to provide cover, so you rely on your self-employed friend, who invoices you for their time.

You’re a card-based business and, at the end of the week, you allocate the tips based on the shifts covered that week. You also allocate a small proportion of the tips to your self-employed friend, which you remit in addition to their invoice.

This allocation is in line with your policy and in a manner which seems fair. However, under the new tipping act, you have failed to distribute 100% of the tips to qualifying workers. As a result, this would be a breach unless you chose to ‘top up’ that amount, which would be an additional cost to the business.

This example is based on a restaurant, as hospitality is the industry we commonly associate with tipping. However, the tipping code applies wherever work-related tips are received and therefore, there are other industries, such a hairdressing and beauty, where it’s more likely to find a mixture of employed and self-employed individuals working on the premises at the same time.

Need help?

If you’d like advice on the status of your workers or any changes you may be considering, please speak to your usual contact or our Business Tax Advisory team would be happy to help. Call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Tessa Brown