Employment (Allocation of Tips) Act 2024 | Employer Guide to New UK Tipping Rules

The Employment (Allocation of Tips) Act came into force on 1 October 2024, making it illegal for employers to withhold tips from workers and introducing strict rules around transparency, allocation and record‑keeping .

This framework is already fully active and enforceable. However, employers should be aware that additional legal tightening will take effect from October 2026, when new duties around consultation and policy review become mandatory. These future changes will strengthen worker involvement and heighten compliance expectations.

This legislation affects almost every business that receives tips, including restaurants, cafés, bars, hotels, salons, delivery companies and any workplace where discretionary payments are made.

Below is a simple, practical overview of what the law currently requires and how employers can stay compliant ahead of the 2026 enhancements.

What types of tips are covered?

Under the Act, the following are classed as “employer‑received tips” and fall fully under the legislation:

• Discretionary service charges
• Tips paid via card, including digital wallets
• Cash tips collected or controlled by the employer
• Tips paid through third‑party apps where the money does not go directly to the worker

Tips given directly to a worker and not controlled or influenced by the employer fall outside the legislation. 

Key employer obligations under the 2024 Tipping Legislation 

The Act creates several legal duties for employers. These include:

1. Tips must be passed to workers in full
   All qualifying tips, gratuities and service charges must be paid to workers without deductions, except for lawful tax. 
   

2. Tips must be paid promptly 
   Employers must distribute tips no later than the end of the month following the month in which the customer paid. 
   Example: A tip left on 8 April must be paid to workers by 31 May.

3. A written tipping policy is mandatory 
   Any business receiving qualifying tips must have a written, clear, accessible tipping policy shared with all workers, including eligible agency workers, and updated whenever practices change.
   -  Policies must be reviewed at least every three years.

4. Keep a record of all tips for 3 years 
    Employers must maintain detailed records for at least three years. These may be requested by workers or tribunals.
   

5. Workers can request information about tips 
   Workers can request: 
   - Total tips paid to the business
   - The amount they personally received 
   
   They may submit one request every three months.
   They cannot request information about other workers’ allocations.
   

What changes in October 2026?

While the 2024 legislation is already in force, October 2026 introduces enhanced legal duties, including:

• A formal requirement to consult workers when designing or revising tipping policies
• A requirement to review the policy every three years
• Stronger expectations for transparency and documentation

Who is protected under the new law? 

The Act covers:

• Employees
• Workers
• Agency workers (where eligible)

This ensures fair treatment across a broad range of employment arrangements.

Why this matters: risks of non-compliance

Failing to comply can lead to:

• Employment tribunal claims
• Compensation orders
• Reputational damage
• Increased scrutiny during HMRC and employment audits

Tribunals must consider the Statutory Code of Practice on the Fair and Transparent Distribution of Tips when assessing complaints.

What employers should do now

A practical checklist:

• Review how tips are collected and paid
  Ensure all tips flow through a compliant process.  
  
• Implement or update a written tipping policy
  The policy must align with the Code of Practice . 
  
• Set up processes to meet payment deadlines
  Payments must be made within one calendar month after the month of receipt .  
  
• Introduce accurate record-keeping
  A secure, reliable system is essential.  
  
• Train managers and payroll teams
  Consistency is key. The law applies to every tip, every time.  
  
• Consult workers
  Consultation with staff will become mandatory as of October 1^st 2026 . 

How The Burgess Hodgson Payroll Team Can Help You

As a CIPP Accredited payroll department, we support hospitality and service‑sector employers with:

• Advising employers on how to set up a Tronc scheme and what is required of them  
• Assisting with spreadsheets that may aid the selected Tronc Master with their calculations
• Applying for PAYE references for Tronc Scheme
• Ensuring timely, accurate payouts through payroll 

contactpayroll@burgesshodgson.co.uk