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Update on allocation of tips legislation 

By August 21, 2023Employment

Changes to the allocation of tips have been on the horizon for a significant amount of time. At present there is nothing legally to prevent an employer from withholding tips from its staff. The new legislation gives workers the right to tips, gratuities and service charges in full, without any deductions for any processing fees etc.    

The new law will come into effect in 2024 to give the Government the opportunity to prepare a Code of Conduct and to hold a consultation.  

However, on 31 July 2023, the Employment (Allocation of Tips) Act 2023 (Commencement No 1) Regulations 2023 (SI 2023/876) brought the following enabling provisions of the Employment (Allocation of Tips) Act 2023 into force:  

  • Sections 1 to 8 and 10 to 12, for the purpose only of enabling the Secretary of State to issue a code of practice under section 27P of the ERA 1996 (as inserted by section 9). 
  • Section 9 which inserts sections 27P to 27T (“Code of practice about tips etc”) into the Employment Rights Act 1996 (ERA 1996). Section 27P of the ERA 1996 enables the Secretary of State to issue a code of practice for the purpose of promoting fairness and transparency in the distribution of qualifying tips, gratuities and service charges. 

On 2 May 2023, the Employment (Allocation of Tips) Bill received Royal Assent.  

Once it is in operation, the Act will require employers to fairly allocate tips over which they exercise control or significant influence (qualifying tips) and pay them to workers in full within a month of payment by the customer. Where tips are paid on more than an occasional and exceptional basis, an employer must have a written policy, available to all workers, setting out how qualifying tips are dealt with.  

Records must also be kept detailing how every qualifying tip, gratuity and service charge is paid. These records must be kept for a three year period, beginning with the date on which the qualifying tips, service charge or gratuity were paid. 

An employee/worker will be permitted to make one written request in any three month period for the records dealing with tips, gratuities and service charges, which the employer should provide in a ‘reasonable time frame’, providing the provision of this date does not breach data protection laws.  

Failure to comply with the statutory code of practice on the fair and transparent distribution of qualifying tips will be admissible in evidence in employment tribunal claims.  

Employment tribunal claims must be brought within 3 months of the alleged failure and can be made in respect of the following complaints: 

  • An employer failing to comply with the Regulations by failing to set out how tips etc must be dealt with
  • An agent failing to comply with the requirements to set out when and how to make payments  
  • An employer failing to keep and maintain records or failing to have a written policy dealing with tips. 

If an employment tribunal finds in the favour of the worker, compensation of up to £5,000 can be awarded for financial loss to the worker arising from the breach. The employment tribunal can also order an employer to comply with its obligations to have a written policy and maintain / provide records.  

If you want any assistance in implementing a written policy before it becomes a legal obligation, or have any other queries regarding the allocation of tips, please do not hesitate to contact a member of the employment team at  

You can find more of the latest legal updates here.

Gemma Wilson

Author Gemma Wilson

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