New Law for the Hospitality industry on tips and service charges

October 14th 2024

The Employment (Allocation of Tips) Act 2023 and the statutory Code of Practice on Fair and Transparent Distribution of Tips came into force on 1 October 2024. 

The government has also published non-statutory guidance for employers on distributing tips fairly. 

The Act regulates how employers allocate tips among workers by introducing obligations to ensure that all “tips, gratuities and service charges” are allocated in a fair and transparent way. 

It protects workers, including eligible agency workers, and employers have a duty to make payment in full no later than the end of the month following the month in which the customer paid the tip, gratuity or service charge. 

Tips paid by customers on or after 1 October 2024 will be caught by the new legislation. 

Possible penalties include: –

  • Compensation of up to £5,000 for any financial loss suffered because of a breach.
  • An order to revise the allocation of tips and make a payment to a worker or workers.

Requirement to have a written policy

Where qualifying tips, gratuities and service charges are paid at (or are attributable to) an employer’s place of business on “more than an occasional and exceptional basis”, the employer must have a written policy on how it deals with them.

Record – keeping

If caught by the legislation the employer must keep a record of how every tip has been dealt with for a period of three years beginning with the date on which the qualifying tip, gratuity or service charge was paid. 

Right to request information on employer’s tipping record

A worker has the right to make a written request for an employer to provide certain records. 

For more details see 

Code of practice on fair and transparent distribution of tips (HTML version) – GOV.UK (www.gov.uk)

Distributing tips fairly: non-statutory guidance for employers – GOV.UK (www.gov.uk)

If you would like any advice on this legislation or would like a Tips Policy, please do get in touch.  

The contents of this article are a general guide only at the date of publication. It is not comprehensive, and it does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.