New rules affecting the treatment of tips will now take effect from 1 October 2024, rather than 1 July as originally expected. A range of employers will need to be aware of these rules including hospitality, hairdressers and taxi firms.

The Employment (Allocation of Tips) Act 2023 – known as the ‘Tipping Act’ - became law on 2 May 2023. Under the Act, from 1 October 2024, employers must pass tips to their workers, and any business where workers frequently receive tips must have a tipping policy. If workers do not feel they are being treated fairly, they can make a written request for a copy of their tipping record and make a claim via the Employment Tribunal.

A key component of the Tipping Act is that employers must also adhere to a new Code of Practice which provides guidance to help ensure that they are distributing tips fairly and transparently.

This code will apply to any tips, gratuities or service charges which are under the control of the employer. Cash tips received directly by the worker – and which they keep – are outside the scope of the Tipping Act and the Code.

The Code of Practice

The new Code of Practice is intended to help employers implement the provisions of the Tipping Act. The Act requires employers to:

• Pass on all tips and service charges to workers without deductions, except in very limited scenarios, such as deduction of income tax. Tips must also be passed over by the end of the month following the month in which the tip was received.
• Ensure that tips are distributed in a fair and transparent manner when the employer takes control, or exerts significant influence, over their distribution.
• Have regard to the Code of Practice on fairness and transparency of tip distribution when they are distributing or influencing the distribution of tips.
• Maintain a written policy on how tips are dealt with at their place of business, and ensure that policy is made available to all their workers.
• Maintain a record of all tips paid at their place of business and how they have been allocated between workers. Workers will have the right to request access to the ‘tipping record’.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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