Set out below are the changes expected in relation to tips and gratuities legislation which are now expected to be in force by the end of 2026. Employers in the hospitality sector need to prepare for the new obligation to consult with workers about their tipping policy.
What does the current law on tips and gratuities say?
The Employment (Allocation of Tips) Act 2023 came into effect on 1 October 2024. It introduced obligations for employers to pass over to their workers in full all tips, gratuities and service charges that they have “control or significant influence” over and to ensure that those tips are allocated in a fair and transparent way. Where tips are paid at (or attributable to) a place of business on more than an occasional and exceptional basis, it also became mandatory for employers to have a written policy on the allocation of tips for that place of business.
On 1 October 2024, a statutory Code of Practice on Fair and Transparent Distribution of Tips was published. Employment Tribunals have a duty to take the Code into account when determining disputes in relation to tipping practices. Further non-statutory guidance Distributing tips fairly: non-statutory guidance for employers was published in September 2024.
What is changing regarding tips and gratuities?
As part of its Plan to Make Work Pay, Labour promised to strengthen the law to ensure workers receive their tips in full and that workers decide how tips are allocated.
The ERA 2025 puts these promises into effect and introduces a mandatory consultation requirement regarding tipping policies. Where an employer does not already have a tips policy in place, it will be mandatory for the employer to consult with workers likely to be affected by the policy before it produces its first tips policy. Consultation must take place:
- with representatives of an independent trade union recognised by the employer in respect of the workers who are likely to be affected by the policy; or
- with representatives appointed or elected by those workers and who have authority to receive information and to be consulted about the policy on their behalf; or
- if there are no such trade union or worker representatives, directly with those workers.
Where there is a tips policy already in place, the employer must review the policy at least once every three years and as part of that review consult with trade union or workers’ representatives, or directly with the workers, as above.
The first review must be completed within three years of the date on which the first version of the tipping policy was made available to workers. Subsequent reviews must be completed no later than three years after the previous review.
There is currently little guidance on what will constitute a review for these purposes but employers will need to ensure that their review includes the required consultation process.
Employers will also be required to make an anonymised summary of the views expressed in the consultation available to all workers of the employer at the place of business where the tips policy applies.
These measures will be enforced via the Employment Tribunal system. If an employer fails to consult properly with their workers about their tipping policy, a worker will be able to present a complaint to an Employment Tribunal. A tribunal will be able to order an employer to comply with its consultation obligations and/or to compensate workers by up to £5,366 (revised annually) for financial loss sustained by the worker and attributable to the employer’s failure.
Consultation on revised Statutory Code of Practice on Fair and Transparent Distribution of Tips
Between February and April 2026, the Government carried out a consultation with stakeholders on the new consultation requirements and updating the existing Code of Practice on Fair and Transparent Distribution of Tips. The current Code of Practice encourages consultation but does not mandate it.
On 29 June 2026, the Government published its response to the consultation and a revised Code of Practice on Fair and Transparent Distribution of Tips. The revised Code of Practice was criticised by Unite, claiming that the Government had reneged on its promise to give workers full control on the allocation of tips. The Government withdrew the revised Code of Practice on 13 July 2026 and has now said that it will carry out a public consultation on the revised Code of Practice, which was republished on 29 July 2026 (with the same substantive content).
Consultation requirements under the revised Code of Practice
The revised Code of Practice on Fair and Transparent Distribution of Tips includes guidance on the new consultation requirements:
- Consultation should be inclusive, genuine, considered and conducted in good faith, with sufficient time allowed for the process. Consultation should be meaningful and not treated as a mere paper exercise.
- Employers are not required to adopt every suggestion made during consultation, but will need to demonstrate fairness and transparency.
- Evidence that workers support a particular method of tip allocation may be relevant when a Tribunal is assessing whether the arrangements are fair and reasonable.
- Consultation should take place with trade union representatives or worker representatives where they exist. In their absence, employers should consult directly with workers.
- Reasonable steps should be taken to obtain the views of minority groups of workers. Where trade unions are recognised in respect of only part of the workforce, employers should consider also engaging directly with groups of workers who are not represented.
- A range of consultation methods may be used, including meetings with representatives, group discussions and surveys.
- Consultation should be proportionate to the size and complexity of the organisation. Worked examples on proportionality will be included in non-statutory guidance.
- Employers should keep a reasonable written record of the consultation process, the views expressed, the decisions taken and the outcomes reached. An anonymised summary must be made available to workers.
- Employers should aim to achieve broad agreement that the tipping arrangements are fair, reasonable and clearly understood by workers.
- A simple majority vote is not the default or preferred mechanism for consultation. Reliance on a majority vote may unfairly favour the largest group of workers or fail to reflect the interests of smaller groups.
- Employers should be mindful of barriers to participation, including language, cultural background, disability, literacy, confidence and the nature of a worker’s role.
- Employers should review their approach to allocation of tips on a regular basis in line with staff turnover and any wider changes to the organisation. There is a risk that a previously lawful and fair method of tip allocation could become unlawful and discriminatory if certain groups of workers become split on the basis of a protected characteristic.
Next steps
The Government will carry out a public consultation on the revised Code of Practice, which was republished on 29 July 2026 (with the same substantive content). The timing of the consultation is not currently known.
These changes to tips and gratuities were expected to come into force in October 2026. However, following the withdrawal of the Code of Practice, the Government expects these changes to come into force by the end of 2026.
Employers will need to review their existing policies regarding tips and consultation practices. As stated above, the first review and consultation should be completed within three years of the tipping policy first being made available to workers, but staff turnover or business changes may mean an earlier review is required. Employers are advised to leave sufficient time before the review deadline to meet the review and consultation obligations.