As of 1st October, the Employment (Allocation of Tips) Act has come into effect, ensuring that workers retain 100% of the tips, gratuities, and service charges they earn. While many employers already pass tips directly to their staff, this new legislation closes any remaining loopholes to guarantee that all tips reach workers.

What Has Changed for Employers?

Under the new legislation, employers are legally obligated to pass all tips, gratuities, and service charges directly to staff without any deductions. This means that if a customer leaves a tip—whether in cash or by card—it must be given to the workers.

Businesses that fail to comply with these rules could face serious consequences. Workers now have the right to take their employer to an employment tribunal if they believe their tips have been unfairly withheld. Employers found in breach could be ordered to pay fines or compensation to affected employees.

To avoid any potential issues, it’s essential for employers to review their tipping policies and ensure full compliance with the law. Transparency is key, and businesses should establish a clear and fair system for distributing tips.

Have You Prepared for These Changes?

With the new laws now in place, employers should already be familiar with the statutory Code of Practice on fair tipping. This code provides comprehensive guidance on distributing tips fairly among workers. The regulations apply to sectors in England, Scotland, and Wales (employment policy is devolved in Northern Ireland), and employment tribunals will reference this code when assessing disputes.

If you haven’t done so already, it’s advisable to review your tipping policies, train staff on the new processes, and confirm that your tip-handling systems comply with the law. The government has also issued non-statutory guidance to support employers.