Tipping the balance: government seeks views on fair tip distribution rules

This article was co-authored with Shannon Willett. 

We previously reported on the overhaul of tipping laws in our blog post here. Aimed at building on and enhancing the existing framework introduced in the Employment (Allocation of Tips) Act 2023 (the “Tipping Act”), to further ensure fair and transparent tipping, tipping laws are now evolving again as a result of the Employment Rights Act 2025. These reforms, which align with the government’s wider commitment to strengthen worker voice, will ensure that tipping arrangements across the hospitality, leisure and service sectors operate transparently, fairly, and consistently. 

As part of the reform process the government recently launched its Make Work Pay: Strengthening the Law on Tipping consultation to finalise the outstanding detail of how the reforms will work in practice.  

Since October 2024, the Tipping Act has required employers to ensure that all qualifying tips, gratuities and service charges are passed on to workers in full and allocated fairly and transparently.

The Code of Practice, which was introduced pursuant to the Tipping Act, currently recommends that employers consult with workers to “seek broad agreement” on the fairness of the allocation of tips. The new rules under the Employment Rights Act will take things a step further. In particular, under the new rules:

• Employers will be required to consult with the workforce (via trade union or worker representatives or directly with affected workers where no representatives are in place) whenever introducing or revising a tipping policy, and again when reviewing that policy on a fixed cycle (see below);

• Tipping policies will be required to be reviewed at least once every three years; and

• Employers will also need to provide workers with an anonymised summary of the views expressed during the consultation process.

These measures will be enforced via the Employment Tribunal system. If an employer failed to consult properly with their workers, for example, a worker would be able to present a complaint to an Employment Tribunal. If successful, the Tribunal would be able to order the employer to compensate the worker by up to £5,000 for any financial loss sustained by the worker which was attributable to the employer’s failure.

The government is now seeking views from all interested stakeholders on the new requirements (see above), in addition to views on how the existing law on tipping and the Code of Practice are working in practice. The consultation closes on 1 April 2026. 

Trade unions have already expressed concerns about the government’s approach. Ahead of the consultation launch, the government published a fact sheet outlining the reforms. Unite responded, commenting that the fact sheet should be withdrawn and revised, reflecting its view that the proposals may not yet go far enough to fully address issues faced by hospitality workers. Their response highlights the wider debate within the sector and the differing perspectives on how best to strengthen protections for workers.

With the new requirements expected to be in force in October 2026, prudent employers will want to begin preparing now. The new requirements are all about transparency and strengthening worker voice. Now is a good time, therefore, for employers to start sense‑checking their current approach, whether that’s refreshing existing tipping policies, reviewing how tips are distributed in practice, or making sure managers understand what’s on the horizon. Getting ahead of the changes will make the transition smoother once the new rules land.

A particularly important change will be the introduction of mandatory consultation when developing or revising tipping policies. Employers, particularly those without established worker or union representatives, will need to think carefully about what consultation will look like in practice. This might include:

• Deciding how representatives will be selected - for example, inviting volunteers, running a nomination and election process, selecting representatives by department or shift to ensure broad coverage, or using existing staff forums where these already exist;
• How consultation feedback will be recorded - such as through a central consultation log, standardised feedback forms, minutes from consultation meetings, anonymous digital surveys, or a dedicated HR inbox to capture written comment; and
• How anonymised summaries will be shared with staff - for example, through a written summary circulated by email, posting a notice on staff boards, uploading a summary to an internal portal, or sharing key themes verbally at team briefings.

If you would like to discuss how these developments may affect your business or would like support preparing for the new obligations, please get in touch. 

In effect, the Act strengthens the law by putting a clear duty on employers not just to distribute tips fairly, but to involve staff in the design and periodic review of the tipping policy – increasing transparency, worker voice and accountability in how tips are handled.

https://assets.publishing.service.gov.uk/media/697b92522ff8d10a830d5d79/tips_and_gratuities_factsheet.pdf