Why this matters.
The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024 and fundamentally changes how tips, gratuities, and service charges must be handled in the UK. Employers are now legally required to pass 100% of tips to workers — retaining any portion, even to cover admin costs, is unlawful. All businesses that receive tips must have a written tipping policy and keep records of tip allocation for at least three years.
Workers have the right to request a copy of their employer’s tipping records and can bring claims to an employment tribunal if tips are withheld or unfairly distributed. The hospitality sector is most affected, but the Act applies to any business where customers leave tips — including beauty salons, taxi operators, and delivery services. Penalties include an order to pay the withheld tips to workers plus compensation of up to £5,000 per affected worker.