Skip to main content

News story

June 30, 2024

Fair tips for all: New legislation ensures transparency in gratuity distribution

New rules to ensure fairness and transparency around handling tips, gratuities, and service charges for hospitality and other service sector businesses come into force on 1 July 2024. The new rules are designed to create an even-handed approach in situations where the employer controls how tips are distributed.

Tips jar

From July 2024, a statutory code of practice will provide businesses and staff with guidance on managing tip distribution. This follows the Employment (Allocation of Tips) Act 2023, which made it unlawful for employers to withhold tips and service charges from staff.

Partner and head of employment Karen Cole stated:

“This code is the final stage in tightening up the rules around how tips are handled in the workplace. Any employers operating a business where gratuities and tipping occur must adhere to the code and review their policies and practices to ensure they comply with the new rules.”

The 2023 legislation aims to control workplace tipping and prevent employers from making deductions or withholding service charges under the guise of ‘administration’ fees, especially for card payments. Previously, businesses often deducted transaction fees from tips given via card payment before passing the remaining cash to workers. Now, the entire sum must be passed on without deduction.

The code of practice is intended to facilitate fairness and transparency. Businesses will be required to:

  1. distribute tips to staff by the end of the month following the month in which the customer paid the tip; and
  2. have a written policy on the allocation of tips and maintain records of the distribution unless they receive gratuities only occasionally and exceptionally.

Karen added:

“Employers need to ensure fair distribution among all workers, except the self-employed. This includes permanent staff, directly recruited staff, agency workers, and zero-hours contract workers in the same location. The distribution does not have to be in the same proportion for all workers; for example, front-of-house staff may be treated differently than back-of-house staff. However, it must be fair, reasonable, and clearly set out in a written policy that workers can access.

Additionally, businesses should remember that tips cannot count towards the national minimum wage.”

The National Minimum Wage Regulations apply to any eligible worker, whether paid by the hour or on another basis. Calculations must ensure the equivalent hourly rate meets the required amount. Any gratuities received must be in addition to the national minimum wage.

Top Tip

Act now and ensure your business complies with the new rules.

Contact Karen Cole today for expert advice on updating your policies and practices. Ensure a smooth transition and avoid potential penalties. Call Karen on 020 7299 6909 for more information.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • Buying a commercial unit: what you need to know
    Buying a commercial unit can be a valuable step for your business, but it comes with legal, tax, planning and property risks. Brinda Granthrai explains what buyers should consider before committing.


    Read more
  • Pension and inheritance tax changes from April 2027: why now is the time to review your will and estate plan
    From 6 April 2027, most unused pension funds and pension death benefits are expected to be included in a person’s estate for inheritance tax purposes. This article explains what the changes could mean for families, pension nominations, wills, chari


    Read more
  • What happens when company owners disagree? The key to keeping private companies running smoothly
    Director and shareholder disagreements can quickly disrupt a business if they are not addressed early. This article explains what disputes can mean for a private company, how they can be avoided, and how legal advice can help protect stability and su


    Read more
  • SMEs urged to review risks as liability rules expand
    New criminal liability rules taking effect on 29 June 2026 will make it easier to prosecute businesses of any size where senior managers commit offences while acting on the organisation’s behalf.


    Read more
  • AI-written grievances add new pressure for employers
    AI is making it easier for employees to produce detailed, formal-looking grievances that refer to legal concepts and workplace rights. For employers, the key is to look beyond the language, identify the core concern and follow a fair, consistent grie


    Read more

What they say...

  • Dino, July 2026
    A lucky professional meeting! “We had an excellent professional experience to recommend to all those who need legal help in the UK.”

  • Client, July 2026
    10-star service from Patrice Lawrence “I cannot encompass in words how brilliant a service and support I have received since working with Patrice. Effective efficiency, exceptional excellence. All this and more. I am grateful that Patrice manag

  • Dino, July 2026
    Unexpected and very valid professional experience “Law firm to be recommended also to non-residents in the UK”

  • Client, July 2026
    Seamless experience “My recent experience with RIAA Barker Gillette was exceptional. They provided considered care, attention to detail, and I felt supported every step of the journey. This was my first time working with a solicitor, and I was

  • Client, July 2026
    Highly professional “Very professional & friendly throughout the whole process. Clear & concise in all communications. Highly recommended.”

Read more
Send this to a friend