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Since 1 October 2024, employers in Great Britain pass every tip they control to workers, shared fairly and paid by the end of the following month, under a written policy and with a record kept for three years.
All guidesThe Employment (Allocation of Tips) Act 2023 added Part 2B to the Employment Rights Act 1996. It has been in force since 1 October 2024, together with a statutory code of practice on the fair and transparent distribution of tips. The Act extends to England and Wales and Scotland, and the code applies in the same three nations. Northern Ireland has its own employment law and the Act does not extend there.
The law sets five duties. Employers must pass on all qualifying tips without deductions except in very limited cases such as income tax, share them fairly, pay them on time, keep a written policy, and keep a record that workers can ask to see.
Section 27C covers "qualifying tips, gratuities and service charges": tips the employer receives, and tips workers receive that are under the employer's control or connected to tips that are. The code says the method of payment does not decide the question. What matters is whether the employer receives the tip or "exercises control or significant influence" over how it is shared.
Two kinds of tip fall outside the law: a cash tip a worker receives and keeps with no involvement from the employer, and a tip paid through an app directly to staff that bypasses the employer altogether (paragraph 13). The part of a customer's payment that is VAT does not count as a tip, gratuity or service charge (section 27C(7)). That matters for a compulsory service charge, which carries VAT.
Section 27D requires the employer to make sure the total of qualifying tips at each place of business "is allocated fairly between workers of the employer at that place of business". It applies to all workers, including agency workers, who are treated as workers of the business where they work (section 27H). It does not apply to the self-employed.
Fair does not require equal shares. The code lists factors an employer may use, and says the list is illustrative:
The factors must be clear and objective and must be stated in the written policy. The employer must avoid direct and indirect discrimination, which the code says can arise where a group given smaller shares includes a disproportionate number of people with a protected characteristic. The code asks employers to consult workers to seek broad agreement that the system is fair, and to review it as staff and the business change.
Section 27G sets the deadline. Tips must be allocated and paid "no later than the end of the month following the month in which the tip, gratuity or service charge was paid by the customer".
For an agency worker, the business can pay the worker's share to the agency within the same deadline. The agency then has until the end of the month after the month it receives the money to pay the worker, and neither may make unauthorised deductions (section 27H).
The code says tips are passed on "without deductions, except in very limited scenarios, such as deduction of income tax". An employer that uses an independent tronc operator, where it is fair to do so, is treated as having shared those tips fairly (section 27F).
An employer that receives qualifying tips "on more than an occasional and exceptional basis" must have a written policy for each place of business (section 27I). The code's example of a business that would not need one is a clothing shop that receives tips a few times a year. A restaurant, café, pub or hotel that takes card tips needs one.
The policy must state:
The policy goes to every worker at that place of business, written in plain language, with an accessible format for a disabled worker who asks (code, paragraph 37). It can be emailed, put on a staff portal or handed out at induction. Agency workers must have the same access, and an amended policy goes to all workers again (section 27I(6)). Where a business is not required to have a policy, but would be if the tips staff receive directly were under its control, it must tell workers that it does not need one and why (section 27I(4) and (5)).
Section 14 of the Employment Rights Act 2025 adds a duty to consult a recognised trade union, worker representatives or, where there are neither, the affected workers before producing the first written policy. The policy must then be reviewed within three years and at least every three years after that, with consultation each time. An anonymised summary of the views given is made available to all workers at that place of business. The section is not in force yet. The government's timeline lists strengthened tipping law for 1 January 2027.
The employer must create a record of how every qualifying tip was dealt with and keep it "for a period of three years beginning with the date on which the qualifying tip, gratuity or service charge was paid" (section 27J). The record shows the total of qualifying tips paid at the place of business, the amount the employer allocated to workers, and the amount it arranged for an independent tronc operator to allocate.
A worker can ask in writing for the record for a period of one month or more that begins no more than three years before the request, ends before it, and covers months in which the worker worked there. Each worker can make one request in any three-month period. The employer must reply within four weeks of receiving the request.
The record is held and disposed of under data protection law. The code says the reply gives the total tips and the worker's own amount, and does not give the amounts paid to other workers.
A worker can complain to an employment tribunal that the employer failed to share tips fairly or to pay them on time (section 27K). The claim must be presented within twelve months of the failure, or of the last failure in a series. A complaint about the written policy or the record (section 27N) must be presented within six months. That limit rose from three months on 1 October 2026 under the Employment Rights Act 2025.
If a claim succeeds, the tribunal must make a declaration and can:
The code's foreword says tribunals have a duty to take the code into account, and that failing to follow it fully "does not in itself amount to proof" that an employer acted unfairly. Agency workers can also claim against an agency that does not pass on their share.
We draft the tipping policy with you and your team, keep the tipping record in payroll for each site, and pay tips out within the deadline every month. When a worker asks for their record, we produce it within the four weeks. More on payroll, tips and tronc, and the tronc schemes guide.
The code of practice says tips are passed on without deductions except in very limited cases, such as income tax.
It covers cash tips the employer has control or significant influence over, such as cash pooled and shared by a manager. Cash a worker is given and keeps is outside it.
Yes. The law covers tips, gratuities and service charges, including service charges added automatically. The VAT part of a payment does not count as a tip.
A claim about unfair sharing or late payment must be brought within 12 months. A claim about the policy or the record is now subject to a six-month limit.
On the government's timeline, employers must consult staff before producing the tipping policy and review it at least every three years. The section is not in force yet.
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