If, in addition to a discretionary service charge, a restaurant business applies a nominal ‘cover charge’ per person to cover costs that are not related to service, would the cover charge be subject to the Tipping Act (ie the Employment (Allocation of Tips) Act 2023)?

For detailed guidance on sections 27C–27Y of the Employment Rights Act 1996 (ERA 1996), inserted by the Employment (Allocation of Tips) Act 2023 (E(AT)A 2023), see Practice Note: Allocating tips, gratuities and service charges to workers. See also Precedent: Policy—tips, gratuities and service charges.

ERA 1996, ss 27C–27Y apply to ‘qualifying tips, gratuities and services charges’, which ERA 1996, s 27C defines as:

1. •

   employer-received tips, and

2. •

   worker-received tips that are subject to employer control or connected with any other worker-received tips that are subject to employer control

An ‘employer-received tip’ is an amount paid by a customer of an employer by way of a tip, gratuity or service charge (however described) which:

1. •

   is received upon its payment or subsequently by the employer or an associated person, or

2. •

   is received upon its payment