Strengthening the taw on tipping: The revised Code of Practice

The Government has published its response to a public consultation on the allocation of tips, alongside an updated draft Code of Practice reflecting the additional obligations for employers introduced by the Employment Rights Act 2025.

The Employment Rights Act 1996, as amended by the Employment (Allocation of Tips) Act 2023, already requires employers to pass on all qualifying tips, gratuities and service charges to workers without deductions, except for very limited permitted deduction.

Employers must ensure tips are allocated fairly, maintain a written tipping policy, keep records, and distribute tips by the end of the month following the month in which they are paid.

Under the 2025 Act, employers will be required to consult trade union or elected employee representatives (or, where none exist, employees directly) when developing a tipping policy. Employers must consult again whenever the policy is reviewed, which must happen at least every three years, and must provide all workers at that place of business with an anonymised summary of the consultation.

The draft Code explains that consultation should be genuine, proportionate, inclusive and transparent, and conducted in good faith rather than as a paper exercise. Importantly, employers do not need to accept every suggestion made by workers, provided they can demonstrate that they have met the requirements of fairness and transparency. Employers should aim for broad agreement that tip allocation is fair, reasonable and clear, with genuine, uncoerced worker support. Employers should also consider the views of minority groups and those less likely to participate, rather than defaulting to a simple majority vote. A written record of the process, views expressed and outcomes should also be kept.

Fair allocation does not necessarily mean an equal share for every worker. There may be differences arising from clear, objective factors such as role, hours, and level of responsibility. Employers should exercise caution over fixed or guaranteed allocations to particular individuals or roles, which risk being deemed unfair.

The transparency requirements are significant. A written policy must be made available to all workers, who also have the right to request their tipping records. Such records must be kept for three years. Where a distribution method is genuinely considered fair by the affected workers, this may help a tribunal conclude that it is fair and reasonable.

For employers, now is the time to review existing tipping policies and design a consultation process proportionate to the business. The public consultation showed that many employers will need to introduce new systems to comply.

With the revised Code expected to take effect in October 2026, there is real benefit in preparing early.

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