On 1 October 2024, new rules came into play, changing the way tips are distributed in workplaces across the UK. The Employment (Allocation of Tips) Act 2023, along with the related statutory Code of Practice on Fair and Transparent Distribution of Tips, is designed to ensure that tips, gratuities, and service charges are given to workers in full and shared out fairly.
To help navigate these changes, the government has also released non-statutory guidance which is a useful resource for employers.
If you run a business where tipping is common—like in hospitality, beauty, or delivery services—here’s what you need to know
What’s Changing?
The underlying principles of the new law are:
- That workers receive all tips in full: employers can no longer withhold a portion of tips, gratuities, or service charges.
- Fair and transparent distribution: Tips must be shared out fairly among staff who help deliver the service, and the process for doing so should be clear to everyone involved.
In meeting these objectives, employers must also ensure the following:
1. Fair Treatment for Agency Workers
Agency workers must be treated the same as directly employed staff. They should not be disadvantaged because of their status.
Example: If your tipping policy gives probationary staff a smaller percentage of tips than more experienced colleagues—and this rule is applied consistently to agency workers—this would likely be acceptable.
2. No Pooling Across Multiple Locations
Tips must be distributed at the location where they were received. Pooling tips from different branches or sites is not allowed.
Example: In a holiday camp that operates as a single site, it would be acceptable to pool tips collected across all food and drink service points and distribute them among staff. However, doing this across multiple holiday camps would not be allowed.
3. Include All Relevant Workers
All employees who directly contribute to customer service should be considered when distributing tips. This includes more than just waitstaff—it could also include roles like baristas, hosts, or even door porters, depending on the setting.
Example: In a fine dining restaurant, including the door porter would be reasonable, but including a marketing manager would not.
Practical Tools and Templates
To make compliance easier, the guidance provides templates for:
- A Tipping Policy – This clearly outlines how tips are collected, distributed, and recorded.
- Request Form for Tipping Records – For staff who want to review how tips were allocated.
- Tipping Record Template – To help employers keep accurate records, as required by the law.
These templates help ensure transparency and provide a clear reference if disputes arise.
Handling Disputes
The guidance encourages employers to try to resolve disputes internally. If this isn’t possible, advice from Acas can be sought.
Failing to comply with the new requirements can lead to legal action through employment tribunals.
Why This Matters for Your Business
With tipping being an important part of income for many workers, these new rules aim to protect workers’ rights and create a fairer workplace. Transparent tipping policies can also enhance employee satisfaction and trust, which is great for team morale and customer service.
If you haven’t already, now is the time to review your tipping practices and make any necessary changes to comply with the new law. For advice, please contact [email protected].
