Tips Act: Guidance for employers

The Employment (Allocation of Tips) Act 2023 (the Tips Act), which regulates how employers allocate tips amongst workers, came into force on 1 October 2024.

New non-statutory guidance has been published, supplementing the statutory Code of Practice on fair and transparent distribution of tips.

Background to the Tips Act

The Tips Act has been a long time in the making. The idea of regulating tips to prevent exploitative practices by employers has been on the government agenda since 2016.

However, it was not until the Government backed a Private Members’ Bill in 2022 that the Tips Act was formally passed through Parliament.

The Tips Act protects workers and certain eligible agency workers and places a duty on employers to ensure that all qualifying tips, gratuities and service charges are allocated fairly to workers, and to make payment in full no later than the end of the month following the month in which the customer paid the tip.

Workers can complain to an employment tribunal where an employer has failed to comply with the obligations on the allocation or payment of qualifying tips and where an employer has failed to comply with requirements to have a written policy or keep records of tip allocation.

Further information on the Act and the Code of Practice on fair and transparent distribution of tips can be found in our earlier article.

Non-statutory guidance on the Tips Act

The new guidance provides information and examples to assist employers on how to:

• Include agency workers in the fair distribution of tips.
• Distribute tips received across multiple sites of operation.
• Determine and justify which workers should be considered in the distribution of tips.

The following templates are provided:

• Tipping Policy.
• Request for tipping record template.
• Tipping record template.

The guidance also reminds employers of the claims that workers can bring when an employer fails to comply with the Act and Code requirements, stressing that efforts should be made to reach a resolution in the first instance.

Comment

Employers who are yet to take steps to comply with the Act and the Code are advised to:

• Review their practices, making any changes needed to ensure compliance.
• Consult with workers on any changes.
• Ensure that no deductions are made from tips.
• Ensure that the allocation of tips is not discriminatory.
• Have a written policy in place governing how tips are allocated.
• Keep detailed records of the distribution of tips.
• Respond to any requests from workers for records.

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