New tips guidance published
Employers, business owners, HR and payroll teams, and workers in sectors where tips, gratuities, or service charges are paid.
Explains the government’s newly published guidance on the fair allocation of tips and what the upcoming legal changes mean in practice.
Failure to understand or prepare for the new rules may expose employers to compliance issues, worker disputes, and potential employment tribunal claims once the law is in force.
The government has published new guidance on protecting tips for workers in England, Wales and Scotland.
The Employment (Allocation of Tips) Act 2023 is intended to ensure that workers receive the tips they earn, rather than them being retained by employers. The government estimates that the new law will deliver around £200m per year to workers.
The Act received Royal Assent on 2 May 2023, but is not expected to come into force until 1 October 2024.
What the new guidance covers
The guidance provides further detail on how the new rules are expected to work in practice. In particular, it explains that:
- Employers will be required to ensure that tips, gratuities and service charges are distributed to workers in a fair and transparent way.
- Employers will no longer be able to withhold tips from workers.
- A new statutory Code of Practice will set out principles for fair allocation of tips.
The Code of Practice will be taken into account by employment tribunals when considering claims relating to tips.
Rights for workers
The new guidance confirms that workers will have:
- The right to request access to their employer’s written tipping policy.
- The right to request records showing how tips have been dealt with.
These rights are designed to give workers greater transparency and support them if they believe tips have not been allocated fairly.
Real-world application for employers
In practice, employers who receive tips or service charges will need to:
- Review how tips are currently collected and distributed.
- Prepare or update a written tipping policy.
- Maintain records that can demonstrate fair allocation.
Although the Act is not yet in force, the guidance makes clear the direction of travel and what tribunals are likely to expect once the rules apply.
Risks and consequences
Once the legislation is in force, failure to comply may result in workers bringing claims before an employment tribunal. Tribunals will be able to refer to the statutory Code of Practice when assessing whether tips have been allocated fairly.
This means that poor record-keeping or unclear policies could increase the risk of disputes.
Next steps
If you operate in a sector where tips, gratuities or service charges are paid, it may be sensible to review your current arrangements well ahead of October 2024.
Practical Support for Employers Navigating the New Tipping Rules
The revised tipping guidance requires employers to take greater care over how tips are handled, recorded, and communicated, especially where payroll is involved. Cigma Accounting, operating from Kingston upon Thames in London, helps employers interpret HMRC expectations and implement practical systems that reduce disputes and reporting errors, supported by specialist payroll services London aligned to real-world tipping arrangements.
When tipping policies are informal or inconsistently applied, the risk of staff disputes and HMRC scrutiny increases significantly. Employers based around Hampton Wick and Surbiton often need clarity on where responsibility sits, and with physical offices across London, Cigma Accounting provides judgement-led guidance and trusted employment tax advice London when tipping practices fall into grey or high-risk areas.
