Back in June 2024, we covered the Employment (Allocation of Tips) Act 2023, which came into force in October of that year.
Now, with the arrival of the Employment Rights Act 2025, the law on tipping is being strengthened with a new requirement to consult workers on tipping policies and a revised statutory Code of Practice on the fair and transparent distribution of tips.
The new measures were the subject of a consultation between February and April 2026, which asked for the views of employers and their representatives, workers and their representatives, consumers and the wider public. The government will now process the results of that consultation before making a final decision on the form that the new law will take.
Why is the law on tipping changing?
The government say their aim is to bolster the protections on tips, through both legislation and guidance, while also ensuring appropriate flexibility for the ‘tipping industries’. These are the sectors where tips are accepted on more than an exceptional or occasional basis.
What does the law on tipping currently say?
The Act says that tips must be shared fairly between the workers involved in providing service to customers and must be passed on in full to those workers by the following month in which the tips are received. Employers cannot make deductions from these tips, gratuities and service charges, except where deductions are required by existing law, such as tax.
Where tips are paid on more than an occasional and exceptional basis, employers must have a written tipping policy, setting out how tips are allocated and distributed to workers, and what steps have been taken to ensure they are handled fairly. This policy must be made available to workers so that they are aware of their entitlements.
Additionally, employers must maintain a tipping record, setting out details of all the tips received at the place of business and the amount allocated to individuals. Workers can access their tipping record to help them understand how tips have been distributed and to check they are receiving their fair share.
The existing statutory Code of Practice gives additional guidance about the fair and transparent distribution of tips and supports employers, workers and others involved where tipping is common.
The Employment Rights Act 2026
Section 14 of the Employment Rights Act 2025 includes new requirements on consultation and review of tipping policies.
It says that, before developing a written policy, employers must consult with the representatives of recognised trade unions or worker representatives, with the aim of reaching agreement with workers. If there are no such representatives in place, the consultations should be between the employer and the workers likely to be affected by the policy.
Section 14 also says that the written policy must be reviewed at least once every three years. When reviews take place, the same process of consultation with workers must be used.
After the consultation, employers will have to let all workers at the business have access to a written, anonymised summary of the views expressed in it.
What happens next?
The consultation closed on 1st April 2026. The government is now analysing all submissions and responses. They intend to publish a full response and an updated statutory Code of Practice later in 2026. It is expected that the new legal requirements and updated Code will come into effect in October 2026.
