Service tipping law now in force

Workers and employees in sectors where tips, gratuities, or service charges are paid.

Confirms that the new legal rules on how tips must be allocated are now in force and explains what protections workers now have.

The law gives workers enforceable rights over how tips are shared. Understanding these rights helps workers identify unfair practices and know when action may be appropriate.

The new law governing the allocation of tips and service charges has now come into force.

The Employment (Allocation of Tips) Act 2023 is designed to ensure that tips left by customers are passed on to workers in a fair and transparent way, rather than being retained by employers.

New Law on Tip Allocation Comes into Force from 1 October 2024

New regulations that prohibit employers from withholding tips for employees in the hospitality, leisure, and services sectors took effect on 1 October 2024. This change follows the enactment of The Employment (Allocation of Tips) Act 2023, commonly referred to as the Tipping Act, along with the statutory Code of Practice on the fair and transparent distribution of tips, which also took effect on 1 October 2024.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted. These new measures apply in England, Scotland and Wales. Employment policy is devolved to Northern Ireland.

Employers who violate these rules could face fines or be required to compensate their staff. Workers will have the ability to hold their employers fully accountable through employment tribunals.

What the law requires

Under the new rules, employers must:

• Pass on all qualifying tips to workers.
• Allocate tips in a way that is fair.
• Apply a clear and transparent method for sharing tips.

A statutory Code of Practice supports the legislation and sets out principles employers are expected to follow when allocating tips.

Rights for workers

The law gives workers new rights, including:

• The right to request a copy of their employer’s written tipping policy.
• The right to request information about how tips have been allocated.

These rights are intended to give workers visibility over how tips are handled and shared.

How disputes may be assessed

If a dispute arises, employment tribunals can take the statutory Code of Practice into account when deciding whether tips have been allocated fairly.

This means the way tips are handled in practice, and not just what is written in a policy, may be relevant.

Real-world implications for workers

In practice, workers should expect greater consistency and transparency in how tips are distributed.

If tip allocation appears unclear or unfair, the new rules provide a clearer framework for asking questions and, where necessary, challenging practices.

Risks and consequences

Where tips are not allocated fairly, workers may be able to bring a claim before an employment tribunal.

Understanding the new rights can help workers recognise when allocation may not meet the required standards.

Next steps

If you work in a role where tips or service charges are common and are unsure whether your employer’s arrangements comply with the new law, reviewing how tips are allocated in practice may be a sensible first step.

Practical Support for Employers Under the New Tip Allocation Rules

With the service tipping law now in force, employers must ensure tips are handled transparently and passed on fairly, with clear processes that align with both employment law and HMRC expectations. Cigma Accounting, based in Hammersmith in London, helps businesses assess whether their tipping arrangements comply with the new legal framework, particularly where payroll involvement creates additional complexity, supported by specialist payroll services London.

Where existing practices were informal or manager-led, the risk of non-compliance is now significantly higher, even for well-intentioned employers. Businesses operating around Ravenscourt Park and Shepherd’s Bush often need clarity on how the law applies in practice, and with physical offices across London, Cigma Accounting provides judgement-led guidance and trusted employment tax advice London when service tipping policies expose employers to disputes or HMRC scrutiny.