Employment Rights Bill series: Further rules on fair tipping

On 1 October 2024, the Employment (Allocation of Tips) Act 2023 introduced a new Code of Practice on the fair and transparent distribution of tips. The Act set out new obligations for employers to ensure that workers receive tips, gratuities and service charges in a fair and transparent way. Where qualifying tips, gratuities and service charges are paid, on more than an occasional or exceptional basis, employers should now have a written policy on how they deal with them. Learn more about the Code of Practice.

This legislation and Code of Practice were devised and implemented by the previous Conservative government, even though the changes took effect after the 2024 general election.

Before gaining power, in its Plan to Make Work Pay Labour pledged to further ‘strengthen the law to ensure hospitality workers receive their tips in full and workers decide how tips are allocated’. To achieve this, the Employment Rights Bill (ERB) introduces new requirements for employers to consult about their tipping practices and review them regularly.

Clause 10 ERB amends existing legislation (section 27I of the Employment Rights Act 1996) so that, before producing the first version of a written tips policy, the employer will be required to consult about its contents with recognised trade union representatives, or ‘worker representatives’ of staff likely to be affected by the policy. The employer will be able to consult directly with workers if there are no trade union or worker representatives.

Employers will also need to review their tips policy at least once every three years. This three-year review cycle will begin from the date the initial version of the policy is implemented. Each time the policy is reviewed, the employer must carry out a consultation exercise as described above.

Importantly, the Bill imposes a requirement that employers must provide all staff with an anonymised summary of the feedback received during the consultation process. This summary must be made available at the business location where the tips policy is implemented.

What does this mean for me?

The existing Code of Practice already recommends that written tipping policies are reviewed on a ‘regular basis’ (in line with staff turnover or any other organisational changes). The Code has statutory status, which means that an employment tribunal must take its best practice suggestions into account if a complaint is made. While introducing a three-year review period means that employers will need to vigilant about scheduling review dates, it may actually be helpful in terms of clarifying expectations.

If your organisation has recently introduced a new tipping policy in response to the 1 October changes, it would make sense to schedule a policy review no later than three years from its implementation date (probably in 2027), remembering to allow time for consultation.

Similarly, the Code of Practice already recommends consulting employees and securing broad agreement to any written tipping policy or changes in tipping practices. The ERB builds in some further structure around this and, like so much of Labour’s employment law policy programme, seeks to formalise a collaborative approach in the workplace rather than relying on an employer’s good will.

It is important to remember that these changes are not yet set in stone, as the ERB may be amended during its passage through Parliament. However, these discrete proposals, tweaking existing rules, are unlikely to be controversial, and it does not appear that any amendments to the ERB have been made to date which impact them.

The Bill is expected to receive Royal Assent in 2025, with most reforms expected to take place in mid to late 2025 or 2026. It is likely that the statutory Code of Practice will need to be revised in light of the ERB changes, and further non-statutory guidance, including examples to help employers comply, is also expected soon. A period of public consultation on one, or both, of these may be required.

See our previous ERB Insights in this series

• Overview: ERB What’s In, What’s Out, What’s Next? (11 October 2024)
• ERB: Flexible Working: Further Flexion (21 October 2024)
• ERB: Day 1 right to claim unfair dismissal (25 October 2024)
• ERB: The Pendulum Swings on Industrial Relations (8 November 2024)
• ERB: The Fair Work Agency (15 November 2024)
• ERB: Dismissal and re-engagement - tying the hands of employers? (22 November 2024)