New regulations that prohibit employers from withholding tips for employees in the hospitality, leisure, and services sectors took effect on 1 October 2024. This change follows the enactment of The Employment (Allocation of Tips) Act 2023, commonly referred to as the Tipping Act, along with the statutory Code of Practice on the fair and transparent distribution of tips, which also took effect on 1 October 2024.
This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted. These new measures apply in England, Scotland and Wales. Employment policy is devolved to Northern Ireland.
Employers who violate these rules could face fines or be required to compensate their staff. Workers will have the ability to hold their employers fully accountable through employment tribunals.
The statutory Code of Practice provides businesses with advice on how tips should be distributed among staff. The Code of Practice is statutory and has legal effect, meaning it can be introduced as evidence in an employment tribunal.