What is tipping law?
The Employment (Allocation of Tips) Act 2023 properly came into force with a Statutory Code of Practice in October 2024.
The legislation requires that workers receive “tips, gratuities and service charges” (‘tips’) in full, and that they are allocated fairly and transparently. Fair distribution does not mean that employers are obliged to allocate the same proportion of tips to each worker. Payments of tips are to be paid in full no later than the end of the month following that in which the customer paid the tip.
If tips are paid on more than an occasional and exceptional basis, employees must have access to a written policy setting out how they are dealt with. They should also have access to records of tip allocation for a period of three years. Failure to comply with the duties may entitle workers to bring claims in the Employment Tribunal.
Reform
The Employment Rights Act (‘ERA 2025’) proposes to require employers to:
- consult with workers when developing their tipping policies;
- review their tipping policy at least once every three years; and
- summarise the views expressed by workers in consultation.
These measures will be enforceable by complaint to the Employment Tribunal. If financial loss has been sustained as a result of the employer’s failure to comply, workers may be entitled to compensation of up to £5,000. Government consultation is expected in relation to this in Winter 2025 and early 2026, with the measures expected to come into force in October 2026.
What does this mean?
Employers will need to ensure that they engage workers through unions or, if relevant, directly to gain an understanding as to what workers would expect to see in their applicable tipping policy. If they do not, they may find themselves facing litigation.
Although employers will not be obliged to act as proposed by workers during consultation, these requirements provide workers with a voice in the process. The right for workers to view a summary of the views expressed within the consultation will assist workers in ensuring that there has been a genuine consultation as opposed to a box-ticking exercise.
If you would like to discuss your tipping policy or indeed anything else affected by the ERA 2025, please contact a member of the Employment team.
To find out what other aspects of employment law are affected by the Employment Rights Act, read our blog “The Employment Rights Act – When to expect change”.
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