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  • New Tip Legislation Affecting Salons in 2024

New Tip Legislation Affecting Salons in 2024

Published date 10 June 2024

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At Alan Howard, we understand the importance of keeping you informed about changes that may impact your business. We want to bring to your attention crucial new legislation set to take effect in late 2024 concerning managing the collection and distribution of tips. This legislation ensures that all salon, barbers and spa employees receive their fair share of tips, with the important tax implications to consider.

What You Need to Know About the New Tip Legislation

Key Changes

  • 100% Tip Allocation to Employees: The new Act mandates that 100% of tips and service charges left by customers must be paid directly to employees. Employers are not permitted to deduct any administration or transaction fees from these tips.
  • Fair and Transparent Distribution: The allocation of tips must be handled fairly and transparently. This means that all employees, regardless of their role, should receive an appropriate share if their work is linked to the salon where the tips were paid.
  • Types of Tips Covered: The legislation applies to both card and cash tips, provided the employer collects and distributes them. Generally, this means tips paid by card, but it also includes cash tips if the employer manages their collection and distribution, such as through a tip jar.
  • Effective Date: The Act is likely to come into force around October-November 2024.

Who Benefits?

All employees whose roles are connected to the salon can receive tips, such as service providers, apprentices, front-of-house staff, and back-of-house staff. Even agency workers and potentially self-employed workers are entitled to a fair share.

Ensuring Fair Allocation

The UK Government is developing a ‘Code of Practice’ to guide the fair allocation of tips. Usually, tips left by a client should go directly to the service providers who carried out the service. Salons must have a transparent, written policy available to employees on how tips are collected and distributed, and any changes to this policy must be communicated as soon as possible. Additionally, a publicly displayed tipping policy for clients may be required.

Payment Timing

  • Timely Distribution: Tips must be paid to employees no later than the end of the month following the month they were received.

Salary Negotiations

  • No Negotiation on Tips: Employers cannot negotiate with employees to vary their salary or wage package in exchange for a share of tips. Tips must remain separate from the employee's overall benefits package.

Next Steps for Salon Owners

  • Review Your Current Tip Policies: Ensure your policies align with the new legislation and prepare to make any necessary adjustments.
  • Communicate with Your Team: Inform your employees about the upcoming changes and how they will affect them. Transparency is key!
  • Prepare for Implementation: Develop or update your written tip distribution policy and consider displaying a tipping policy for clients.
  • Stay Informed: Keep an eye out for the UK Government’s ‘Code of Practice’ for detailed guidance on fair allocation.

For more information, visit  www.gov.uk to learn more about the Tipping Act.

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