New rules on tipping - the Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024 and will apply to tips paid by customers on or after this date. 

This act introduces new changes to the current law on tipping and imposes additional obligations on employers when dealing with tips. 

It is suggested that the new rules will protect the tips of more than 2 million workers, most likely to be in the hospitality sector. 

The act aims to improve fairness, by regulating how employers allocate tips among workers, with obligations introduced to ensure that workers receive any “tips, gratuities and service charges” in full, and that they are allocated by employers in a fair and transparent way. It will therefore become unlawful for employers to withhold tips from workers. 

The key features of the act are as follows:

• Employers are required to pass on all tips and service charges to workers without deductions, except in extremely limited scenarios. 
• A duty imposed on employers to ensure all tips are distributed in a fair and transparent manner. 
• Payment of tips are to be made in full no later than the end of the month, following the month in which the tip was paid by the customer. 
• Where there has been a failure to comply with the obligations imposed by the new act, workers can bring a claim in the employment tribunal. The time limit to bring a claim is 12 months from the date of the failure to comply. 
• A tribunal can order an employer to:
  • revise the allocation of tips; and 
  • make a payment to a worker 
• A tribunal may also award compensation of up to £5,000 for any financial loss suffered as a result of the breach. 
• Employers must keep a record of how tips are being dealt with. This must be kept for 3 years beginning with the date on which the qualifying tip was paid. 

The act applies to all workers – this is to include all permanent staff, directly recruited staff, agency workers and zero hours contract workers in the same location. 

In order to ensure the fair allocation of tips, employers will need to have a written policy in place, available to all employees, setting out how tips are to be dealt with. 

The government has also published a statutory Code of Practice, and further guidance on the code (which is non-statutory) to assist employers and workers understand the new rules. 

How can we help?

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