Tipping bill: how the law has changed

Changes to tipping laws come into force today that require operators to pass on 100% of tips and service charge to employees.

The Employment (Allocation of Tips) Act and the statutory Code of Practice have made a number of changes designed to make tipping practices more transparent and standardised across hospitality businesses.

The Department for Business and Trade has estimated that the changes will mean around £200m that would have been retained by employers will now be passed on to employees.

If an employer fails to meet the requirements of the law, workers will be able to bring a claim through an employment tribunal and claim up to £5,000 compensation.

Operators must now:

• Pay all tips to employees by the end of the month following when they were received.
• Pay the tips to employees at the place of work where the tip was received, rather than sharing them across a group.
• Implement a written policy on allocating tips.
• Include agency workers and those on zero-hours contracts in a share of any tips given during their shifts.

For full analysis of the changes and what it means to your business, join the free online Tipping and Payment Summit on Thursday.

Minister for employment rights Justin Madders said: “When you tip someone for good service, you expect them to keep all their tip. They did the work – they deserve the reward.

“This is just the first step of many in protecting workers and placing them at the heart of our economy. We will be introducing further measures on tipping to ensure workers get their fair share of tips.” 

UKHospitality chief executive Kate Nicholls said the association supported the changes, formalising what she said was already “commonplace in the sector as businesses have been preparing for this legislation for a number of years”.

She added: “New rules naturally come with an administrative burden and businesses will see some additional cost as they work through them in practice.

“It’s another example of costs being placed on a sector that can least afford it, and we continue to urge the chancellor to bring down hospitality’s cost burden at the Budget, primarily through taking action to avoid the billion pound business rates bombshell set to hit the sector next year when relief ends.”

Andrew Tighe, director of strategy and policy at the BBPA, said the new framework would “introduce a level playing field for all businesses, ensuring that those who were not already passing on all tips to their staff will now be required to”.

He said: “A greater a degree of consistency and transparency when dispersing tips will benefit both existing and new staff alike.

“We would urge all operators to review the guidance and ensure their policies are compliant with the legislation.”

Join the free Tipping and Payment Summit

Photo: Dejan Dundjerski/Shutterstock