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

  • When charity shouldn’t begin at home
    The downfall of the Captain Tom Foundation is a cautionary tale of what happens when a charity gets too close to home — highlighting the complexities of charity governance and accountability in the sector. The foundation, created to continue the fu


    Read more
  • Six tips to make things simple for your executors
    An executor is legally responsible for carrying out the instructions set out in a will.


    Read more
  • Staying ahead in a changing legal landscape
    Regularly reviewing employment contracts and policies is essential for legal compliance and risk mitigation. Stay updated on legislative changes, workplace trends, and best practices to protect your business and employees.


    Read more
  • RIAA Barker Gillette (UK) acts for Alexander Nix in Commercial Litigation
    Press Release


    Read more
  • New sexual harassment rules may signal changes to office parties or a decline altogether
    Tomorrow is expected to be one of the busiest nights for office Christmas parties this year. While these celebrations are a staple of the festive season, offering a chance for colleagues to unwind and bond, they also bring unique challenges for emplo


    Read more

What they say...

  • Mikaela, February 2025
    “Martin was brilliant – so professional and personable. He clearly has a lot of expertise, and we always felt were in safe hands. He’s always available to speak on the phone, and is incredibly patient and reassuring. He worked effic

  • Bibiana Farenzena, February 2025
    “Victoria Holland and Evangelos Kyveris I want to thank you for your involvement and efforts on this case. You have been immensely helpful, and I appreciate all your knowledge and advice regarding this matter.”

  • Dabid Shaw, February 2025
    “Excellent , personalised one to one client care. Options laid out in a comprehensible manner. Fees appropriate for service provided.” Herman Cheung

  • Michael, February 2025
    “Martin was great to work with, despite a very difficult first buyer, second time round was the charm! Thanks to Sharon too.”

  • Annette, February 2025
    “We contacted RIAA Barker Gillette to get our wills arranged. Herman was professional & helpful with all aspects of the process. He explained everything clearly, notified in writing everything we discussed & answered the many questions

Read more
Send this to a friend