Draft code of practice on tipping released
Employers will be required to consult workers before introducing or reviewing workplace tipping policies under revised statutory guidance published by the government ahead of new rules due to take effect in October 2026.
The government has published its response to a consultation on tipping legislation alongside a revised draft Code of Practice reflecting additional obligations introduced by the Employment Rights Act 2025.
The reforms build on the Employment (Allocation of Tips) Act 2023, which was introduced to ensure tips, gratuities and service charges are passed on to workers fairly and transparently, without unlawful deductions. The 2025 Act expands those protections by giving workers a greater voice in how tipping policies are developed and reviewed.
Tipping consultation
Restaurant tips should be included in holiday pay
Under the new requirements, employers must consult recognised trade unions or elected employee representatives when introducing or reviewing a tipping policy, or consult workers directly where no representatives exist. Consultation must be repeated whenever the policy is reviewed, which must take place at least every three years, and employers must provide staff with an anonymised summary of the views expressed.
The revised Code states that consultation should be “genuine, proportionate, inclusive and transparent”. While employers are not required to adopt every suggestion, they should seek broad agreement that tipping arrangements are fair, reasonable and clearly understood. Consultation may include meetings, group discussions or staff surveys, depending on the size and nature of the business, and employers should retain written records of the process, the views expressed, and the decisions reached.
The Code also confirms that worker support for a particular distribution method may assist an employment tribunal in deciding whether a tipping arrangement is fair and reasonable.
The wider statutory framework requires employers to pass on all qualifying tips and service charges without deductions, except where required by law, such as for income tax. Employers must also maintain a written tipping policy, keep records of qualifying tips and their allocation, make those records available to workers on request, and have regard to the statutory Code whenever they exercise control or significant influence over tip distribution.
The consultation response suggested employers had largely adapted to the existing regime, which came into force in October 2024. Among employer respondents, 16 of 29 said they distributed tips exclusively through payroll, while only three paid tips entirely outside payroll. Nearly all respondents (27 of 29) said they believed they complied with the requirement to pass on tips in full.
However, businesses reported that the legislation had increased administrative complexity and costs. Respondents cited the need to absorb card processing fees, banking charges and tronc administration costs, as deductions from workers’ tips are prohibited. Others called for clearer guidance on issues including holiday pay, guaranteed tronc allocations, non-monetary tips and whether support centres or dark kitchens can participate in tronc arrangements.
The government acknowledged these concerns but said the requirement to pass on tips in full remained unchanged. It also reiterated that while it took no view on the use of automatically applied service charges, businesses must make clear whether such charges were optional or mandatory and ensure customers are not pressured into paying them.
The draft Code has been laid before parliament and is subject to approval. If approved, the government expects the revised Code and new consultation requirements to come into force in October 2026.
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