Tipping Rules Are Changing: What Employers Need to Know 💰

If your business receives tips, gratuities, or service charges, you should already have processes in place to make sure they're distributed fairly and transparently.

Further changes under the Employment Rights Act 2025 are on the way, strengthening these responsibilities and giving workers more involvement in how tipping arrangements are decided. These requirements are expected to come into force by the end of 2026.

For employers, it's about creating a tipping process that's clear and transparent, so employees understand how their tips are distributed and feel confident that the process is fair.

What Are the Current Rules?

Since October 2024, employers have been required to ensure that qualifying tips, gratuities and service charges they control or significantly influence are passed on to workers in full and allocated fairly.

For businesses where qualifying tips are received on more than an occasional or exceptional basis, this means having a written tipping policy that clearly explains how tips are handled and distributed.

Employers must also keep records of qualifying tips and how they have been allocated for three years, with workers having the right to request certain information from those records.

So, while the upcoming changes will introduce additional responsibilities, they build on requirements that employers should already have in place.

What's Changing?

The upcoming changes place a stronger focus on worker involvement and transparency.

There are three key changes employers need to be aware of:

👥 Worker consultation

Current guidance encourages employers to consult workers about how tips are shared, but the new legislation will make this a legal requirement. Employers will need to consult recognised trade union or other worker representatives where they exist, or workers directly where there are none, when developing or reviewing their tipping policy.

📝 Regular policy reviews

A tipping policy won't be something you can put in place and forget about. Written policies will need to be reviewed at least once every three years, with workers consulted as part of the review.

🗣️ Greater transparency

Following consultation, employers will need to share an anonymised summary of the feedback received with all workers at the place of business where the policy applies, helping employees understand the views that have been considered as part of the process.

Overall, these changes are designed to give workers more involvement in how tipping arrangements are decided and make the process of creating and reviewing tipping policies more open and transparent.

For employers, this means thinking not only about how tips are distributed, but also how those decisions are made, communicated and reviewed.

How Can Employers Prepare?

If your business operates a tipping system, you should review your current arrangements and consider what may need to change.

Begin by reviewing your existing tipping policy. It should clearly explain how tips are collected, allocated and distributed, giving workers a clear understanding of how the process works.

You'll also need to think about how worker consultation will work in practice. Who will you consult when creating or reviewing your policy? How will you give people the opportunity to share their views? And who will be responsible for managing the process?

It's also worth considering how you'll record the feedback you receive and demonstrate that workers have been properly consulted. Having a clear process in place will make future policy reviews much easier to manage.

Finally, think about how you'll communicate the outcome. As employers will need to provide affected workers with an anonymised summary of the feedback received, think about how this will be prepared, shared and stored.

Where Could Businesses Still Be Falling Short?

Having a tipping policy doesn't necessarily mean your business is fully prepared.

One common issue is a lack of transparency. Workers should understand how tips are allocated and distributed, rather than being left unsure about how their share has been calculated.

Record keeping is another area that gets overlooked. Employers should already be keeping records of qualifying tips and how they have been allocated for three years. If your records are incomplete, inconsistent or difficult to access, you should review how this information is managed before the new changes take place.

There may also be a gap between what a policy says and what happens in practice. If different managers, teams or locations apply your tipping arrangements differently, this can lead to inconsistency and confusion.

With the new requirements introducing mandatory worker consultation and regular policy reviews, employers will need to make sure their tipping arrangements continue to reflect both the legislation and how their business operates in practice.

Taking the time to identify these gaps now can help you create a tipping process that is clear, consistent and transparent for everyone involved.

Why Getting It Right Matters

For many workers, tips can make up an important part of their overall income, so it's important they feel confident that tips are being handled fairly, consistently and transparently.

Clear tipping arrangements allow workers to understand how their share is calculated, when they'll receive it and how decisions about distribution are made. Giving workers a greater voice in the process also helps to build trust and reduce confusion or concerns about whether tips are being shared fairly.

For employers, having a clear policy, accurate records and a consistent process makes tipping arrangements easier to manage and gives managers greater confidence when answering questions from their teams.

Ultimately, getting tipping arrangements right benefits everyone, giving employers a clear and consistent process to follow and workers confidence that their tips are being handled fairly.

Find Out More

If you'd like to explore the changes in more detail, the Government's Distributing tips fairly guidance explains the current rules and includes template policies and records. We'll update you once the revised Code of Practice is finalised.

Read the Government Tips and Gratuities Factsheet

How Petaurum HR Can Help

If your business receives tips or service charges, now is a good time to make sure your current arrangements are clear, consistent and ready for the upcoming requirements.

At Petaurum HR, we can help you ryour existing tipping policy and processes, identify any gaps, and help you understand what may need to change.

From worker consultation and record keeping to policies and employee communication, we can help you put practical arrangements in place that work for both your business and your people.

If you'd like support reviewing your tipping arrangements, get in touch with the Petaurum HR team.