"These new laws reflect a growing emphasis on worker rights and transparent business practices," says Chris Hughes, VP for EMEA, Legal & International Compliance at Magnit™. "Organisations that proactively adapt to these changes will not only ensure compliance but also position themselves as employers of choice in an increasingly competitive labour market."
The Employment (Allocation of Tips) Act 2023
The Employment (Allocation of Tips) Act 2023, set to come into force on 1st October 2024, introduces new regulations on how service charges and tips are allocated to workers. Recently, the Secretary of State has approved and confirmed a statutory Code of Practice on Fair and Transparent Distribution of Tips, which will also come into force on the same date. This Code provides crucial guidance for employers implementing the Act's provisions.
The Act requires companies to allocate 100% of qualifying tips to their workforce, save for tax and National Insurance contributions. Qualifying tips are those received or controlled, or significantly influenced by the employer, including both automatically added and voluntary service charges. However, cash tips paid directly to workers and digital tips sent via apps without employer intervention are outside the Act's scope.
Under the new regulations, employers must have a written tips policy that clearly outlines the allocation and distribution of tips. This policy must be disseminated to all workers, including agency workers. The Code emphasises that tips should be allocated and distributed in a fair, reasonable, and timely manner. While consultation with workers regarding the policy is recommended, it is not legally required unless stipulated by other obligations.
The Code provides some flexibility in how employers allocate tips, allowing for consideration of factors such as the type of role, basic pay, hours worked during the period when tips are received, and individual or team performance. However, employers must avoid unlawful discrimination when deciding on these factors. The Code also addresses the use of troncs for tip distribution, stating that employers can choose this method but must ensure the tronc operates independently and fairly. If employers become aware of unfair practices by the tronc master, they must take action to maintain fair allocation.
"Businesses in affected sectors should start preparing now," advises Hughes. "This includes setting up systems to record tips and service charges, informing clients of the upcoming changes, and reviewing existing tip policies. It's crucial to stay informed about the forthcoming secondary legislation and code of practice."
UK Procurement Act
Coming into force in October 2024, this Act aims to make public procurement more flexible, strategic, and transparent. The Act requires contracting authorities to consider small to medium-sized enterprises that may have typically faced barriers to participation. It mandates public notices on tenders for procurement of services and aims to deliver value for money, maximise public benefit, share information to allow suppliers and others to understand policies and decisions, and ensure integrity in the procurement process. A new government notice portal will be used for all tenders.
The Act also introduces a requirement for clear Key Performance Indicators (KPIs) and the publication of KPI performance, although the specifics of enforcement, tracking, and measurement are yet to be clarified.
"The Procurement Act represents a significant shift in how public contracts are awarded and managed," Hughes explains. "It opens up new opportunities for small and medium-sized enterprises while demanding greater accountability from all parties involved in public procurement."
While these laws bring new compliance challenges, they also offer opportunities for organisations to improve their workforce management and procurement strategies. By embracing these changes, companies can enhance their reputation, improve worker satisfaction, and potentially gain a competitive edge in both the labour market and public sector contracts.
For more insights into the UK's changing labour landscape, download the Q3 2024 edition of Magnit’s Regulatory Newsletter