Guides The Tips Act, explained
The Tips Act 2023: what hospitality employers must do
Since 1 October 2024, the Employment (Allocation of Tips) Act 2023 has set legal duties for every UK business whose staff receive tips. If customers tip at your venue more than occasionally, the Act applies to you. Here is what it actually requires, with the wording of the law itself so you can check us.
Duty one: pass tips on in full
The central duty is that everything the customer leaves as a tip reaches your workers, allocated fairly:
“An employer must ensure that the total amount of the qualifying tips, gratuities and service charges paid at, or otherwise attributable to, a place of business of the employer is allocated fairly between workers of the employer at that place of business.”
“Total amount” means no deductions. The statutory Code of Practice summarises the duty as: “Pass on all tips and service charges to workers without deductions, except in very limited scenarios, such as deduction of income tax” (Code §2(a)). The deductions venues historically made, card processing fees, admin charges, breakages, till shortages, all come out of the business, not the tips.
What counts as fair is guided by the Code of Practice, which tribunals must take into account. Fair does not have to mean equal: hours worked, role, and seniority are all factors the Code lists as legitimate. It does have to be applied consistently and be explainable.
Duty two: pay them out on time
“The employer must— (a) ensure that a qualifying tip, gratuity or service charge is allocated in accordance with section 27D(1), and (b) make any payment that the employer is required to make to a worker under section 27D(2) as a result of that allocation, no later than the end of the month following the month in which the tip, gratuity or service charge was paid by the customer.”
The Code gives the worked example: a tip left on 23 June must be distributed by 31 July at the latest (Code §33).
Weekly and fortnightly distribution sits comfortably inside the deadline. Monthly is at the legal edge: a tip received on the 1st and paid at the end of the following month is roughly 60 days. Anything slower than monthly breaches §27G.
Duty three: a written tips policy
The trigger is low. If tipping at your venue is routine, you need one:
“Where qualifying tips, gratuities and service charges are paid at, or are otherwise attributable to, a place of business of an employer on more than an occasional and exceptional basis, the employer must have a written policy on dealing with qualifying tips, gratuities and service charges for the place of business.”
The policy must say whether you require or encourage tipping, and how tips are dealt with and allocated (§27I(2)). It must be available to every worker at the venue (§27I(3)), including agency staff. We cover the required contents in detail in the written policy guide.
Duty four: keep records for three years
“...the employer must— (a) create a record of how every qualifying tip, gratuity and service charge paid at, or otherwise attributable to, the place of business has been dealt with in accordance with this Part, and (b) maintain that record for a period of three years beginning with the date on which the qualifying tip, gratuity or service charge was paid.”
Workers have a statutory right to see their slice of that record. A worker can make a written request covering any period of one or more whole months in the last three years, once per three months, and you must respond within four weeks (§27J(3), (7), (8) and (11)).
The records duty is the one a spreadsheet quietly fails. It is not enough to know what was paid out this week; you need to be able to show how every tip was dealt with, three years back, when a worker or a tribunal asks.
Agency and zero-hours staff count
The Act extends the regime to eligible agency workers (§27H), and the Code is explicit that fairness applies across “a mixture of permanent staff, directly recruited staff, agency workers and zero hours contract workers in the same location” (Code §17). Agency workers must also be able to see the written policy (Code §18).
What happens if you get it wrong
Workers enforce the Act through employment tribunals, and the windows differ by duty. For unfair allocation or late payment the claim window is twelve months from the failure (§27K(3)). For policy or records failures it is three months (§27N(2)). A tribunal that upholds a complaint can order you to revise the allocation, order payments to workers beyond the person who complained, and award compensation:
“If an employment tribunal makes a declaration under section 27L(1)(a), it may order the employer or agent (as the case may be) to pay to the complainant such amount, not exceeding £5,000, as the tribunal considers appropriate in all the circumstances to compensate the complainant for any financial loss sustained by the complainant which is attributable to the matter complained of.”
The same £5,000 ceiling applies separately to policy and records failures (§27O(2)). And an order made after one worker’s complaint does not stop other workers bringing their own (§27L(4)).
What changes from October 2026
Section 14 of the Employment Rights Act 2025 amends the written-policy section of the Act. It is not yet in force; it commences when the implementing regulations are laid, expected October 2026. Three things change:
- Consultation before the first policy. New §27I(2A) requires employers to consult trade-union or elected worker representatives, or, where there are none, the affected workers directly, before producing the first version of the policy.
- A three-year review cycle. New §27I(3A)–(3C) require the policy to be reviewed at least every three years, with consultation as part of every review. The clock runs from the day your first policy was made available, even where that predates commencement, so a venue that published in October 2024 is already partway through its first cycle.
- An anonymised summary. New §27I(7) requires a summary of the views expressed in any consultation to be made available, in anonymised form, to all workers at the venue.
None of this bites yet, but the review clock is already running in the background. If your policy went up in late 2024, plan for a consulted review before late 2027.
Sources
This guide summarises the primary sources below, as in force on 24 August 2026. Quotes are verbatim.