New law on tips to generate £200m for hospitality workers

New law on tips to generate £200m for hospitality workers

After years of campaigning, trade unions and hospitality workers are set to benefit from a new tipping law that has been passed. The Employment (Allocations of Tips) Act 2023, which received Royal Assent in May 2023, will come into effect as of 2024 and is predicted to return £200m to the pockets of workers each year.

The new Allocation of Tips law aims to rectify the long-term issue of employers deducting service charges from tips and gratuities which has often left employees with less than what customers believe they are receiving.

This new legislation is expected to affect approximately 2 million workers in the UK working in pubs, cafes, and restaurants, for who tips make up a large portion of their take home pay.

UK Hospitality Chief Executive, Kate Nicholls, commented:

We’re pleased to support this new piece of legislation as it comes into law today and look forward to working with Government and other stakeholders on a code of practice that ensures a fair distribution of gratuities amongst all who contribute to providing great hospitality.

What will the Employment (Allocation of Tips) Bill 2023 cover?

The new legislation once in affect will include:

  • A requirement that means employers will have to pass 100% of tips to staff, with the only deductions coming from those required by tax law
  • A statutory Code of Practice on Tipping setting out the principles of fairness and transparency that employers must follow
  • A requirement that employers must have a mandatory written policy on tips and gratuities – including how to distribute them fairly and how to keep a record of how tips are distributed for three years from the date received
  • A right for employees to request information on their employer’s tipping record over a period during which they had worked for the employer within the last three years
  • Requirements for tips that are distributed via a tronc system to be paid no later than the end of the month following the month of which they were first paid by a customer
  • A right for agency employees to also benefit from the Allocation of Tips bill

About our expert

Simon Gilmour

Simon Gilmour

Head of Employment
Simon Gilmour is Head of Employment at Harper James. He joined the firm in April 2018 as a partner in the employment team. Having qualified as a solicitor in 1994, he has worked at top 50 law firms in the West Midlands for 25 years, 18 of which were as a partner and Head of Department.

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