Glass jar with some coins in and a label reading Tip Box
Tip top! Government consults on a new code for sharing tips

On 15 December 2023, the Government announced a consultation on the proposed code of practice on fair and transparent distribution of tips. This follows the passing of the Employment (Allocation of Tips) Act 2023 – known as the ‘Tipping Act’ which became law in May 2023. A key component of the Tipping Act is that the Government must introduce a new code of practice to provide guidance to help ensure that employers are distributing tips fairly and transparently. 

The Government has three principles for tips:

  • It should be clear to consumers that they are voluntary;
  • Tips should be received by workers; and
  • It should be clear and transparent to consumers and workers how the payments are treated.

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 this 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’.

All the measures in the Tipping Act, and the final version of the code of practice, will take effect from 1 July 2024.

The Government is keen for both employers and their workers to contribute to the consultation on the code. The draft code is available on GOV.UK and there is an online form to provide feedback. The deadline for commenting is 22 February 2024.

 

This article reflects the position at the date of publication (16 January 2024). If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.