Government Seeks Views On Its Draft Revised Code Of Practice On Distribution Of Tips

Since October 2024, employers have been required to ensure that workers receive tips in full and that they are allocated in a fair and transparent way. To assist employers in complying with their obligations, the Government produced a Code of Practice on fair and transparent distribution of tips. Under the Employment Rights Act 2025, the Government seeks to strengthen protections further by requiring employers to have a written policy in place and by introducing a statutory requirement for the employer to consult with its workers about its policy on allocation of tips. The Government therefore proposes some changes to the Code of Practice on which it seeks feedback by 29 September 2026, with the revised Code expected to come into force later in 2026. We highlight below changes in the Code that will have an important impact on employers whose workers receive tips, service charges or gratuities.

Important changes in the revised Code are:

• Clarification that employers should not seek to avoid their obligations by rebranding tips, gratuities or service charges using a different label

• Confirming that employers should:

  • Maintain a written policy on how tips are dealt with, reviewing this policy at least once every three years

  • Consult with workers when developing or reviewing the tipping policy (with such consultation taking place with trade union representatives where there is a recognised trade union). The consultation:

    • Should be genuine, considered and conducted in good faith

    • Should not be a paper exercise

    • Is not binding and employers do not have to agree to every suggestion made by workers

    • Involves seeking the views across all relevant groups of workers and should not rely solely on the views of the largest group

  • Make an anonymised summary of views expressed during consultation available to all workers

• The written policy that results from consultation should be written in plain language and should include

  • How tips are accepted

  • How tips are allocated and distributed

  • The steps the employer takes to ensure tips are handled fairly

  • What steps the employer takes to consult with workers

• Adding to the current explanations as to what constitutes a “qualifying tip”. Worker-received tips that at no stage are under the control of the employer do not count as qualifying tips. The previous example of this was a cash tip given to a worker where the worker has no obligation to pool that tip and can keep for themselves. The revised Code clarifies that the same principle applies to a direct tip to a worker using a tipping app where the tip goes directly to the worker

• Employers are discouraged from arrangements under which fixed or minimum sums are allocated to particular individuals or categories of workers

• Employers are encouraged to share their written tipping policy with customers or to display it publicly (although that is not a statutory requirement)