The UK’s Employment (Allocation of Tips) Act 2023 has now been in force for a year. This article reviews its impact on fair tip distribution, compares it with Ireland’s 2022 reforms, and highlights key differences in scope, enforcement and transparency.

Introduction

As the UK’s Employment (Allocation of Tips) Act 2023 (“Tipping Act”) marks its first anniversary, the hospitality and service sectors are reflecting on a year of significant change. The Act, which came into force on 1 October 2024, was introduced to ensure tips, gratuities, and service charges (“tips”) are distributed fairly and transparently to workers, addressing longstanding concerns about employer deductions and unclear tipping practices. 

The UK’s approach to tips and the Code of Practice

The Tipping Act was a response to public and media pressure following reports that some employers were withholding or unfairly distributing tips. The Act amended the Employment Rights Act 1996, making it unlawful for employers to make deductions from tips intended for staff, except for statutory deductions such as tax. Employers must now ensure that 100% of qualifying tips are paid to workers in full and allocated in a manner that is “fair”. 

A cornerstone of the new regime is the statutory Code of Practice on Fair and Transparent Distribution of Tips (“Code”), which came into effect alongside the Tipping Act. The Code sets out principles for fairness and transparency, requiring employers to: 

• Pass on all tips to workers without deductions (except for tax). 

• Distribute tips fairly and transparently when the employer controls or significantly influences their distribution. Pooling tips across multiple business sites is not permitted. 

• Maintain a written tipping policy, accessible to all workers. 

• Keep records of all tips received and their allocation, which workers can request to see. 

• Include agency workers in the distribution of tips where relevant. 

The Code does not prescribe a single method for allocation but requires that any distribution be based on clear, objective, and fair criteria such as role, hours worked, seniority, or customer intention. Employers may use tronc arrangements (where a troncmaster allocates pooled tips) but must ensure these arrangements also comply with the Code’s fairness principles. 

Transparency is further reinforced by the requirement for a written policy and the right for workers to access tipping records. Disputes should be resolved internally where possible, with Acas available for mediation. If unresolved, workers can bring claims to an employment tribunal, which can order compensation of up to £5,000 per worker for financial loss due to unfair allocation or lack of transparency.  

While the UK Tipping Act mandates transparency (written policies, access to records) as a core pillar of fairness, implementing this right in practice can be complex. In particular, the legislation allows workers to request limited information, the total tips collected and their individual share but restricts access to detailed allocation data for data protection reasons. This can inadvertently lead to perceptions of unfairness among staff who lack the full context of the distribution formula. We recently published an article ‘understanding tipping record requests and managing perceptions of fairness’ which explored this in detail. 

Ireland’s 2022 Amendment compared to the 1991 Act 

Ireland’s Payment of Wages (Amendment) (Tips and Gratuities) Act 2022, which came into effect on 1 December 2022, shares many of the UK Act’s aims but has some notable differences from both the UK approach and Ireland’s original Payment of Wages Act 1991. 

Key features of the 2022 Amendment include: 

• Clarity on definitions: The 2022 Amendment defines tips, and places them outside the scope of contractual wages. 

• Prohibition on offsetting wages: Employers cannot use tips to ‘make up’ contractual rates of pay. 

• Display requirements: Employers must prominently display their policy on the distribution of both cash and card tips. 

• Fair and transparent distribution: Tips received electronically (by card or smartphone) must be distributed fairly and equitably, with context-specific factors such as hours worked, role, and performance considered. 

• Service charges: Any charge described as a ‘service charge’ must be distributed to staff as if it were a tip. 

• Worker statements: Workers must receive a statement showing the amount of tips obtained and their share for each period. 

The original Payment of Wages Act 1991 did not specifically address tips, focusing instead on the protection of wages and prohibiting unlawful deductions. The 2022 Amendment was necessary to close loopholes that allowed employers to retain or (mis)use tips, and to provide workers with legal entitlements to tips paid electronically. 

Notable differences between the UK and Ireland 

• Scope of regulation: The UK Tipping Act covers all tips where the employer has control or significant influence, regardless of payment method. Ireland’s Act specifically targets electronic tips, with cash tips less regulated unless they are pooled or controlled by the employer. 

• Written policy: Both require a written policy, but the UK’s Code of Practice is statutory and must be followed, while Ireland’s requirement is for prominent display and transparency. 

• Agency workers: The UK Act explicitly includes agency workers in tip distribution; Ireland’s Act is less explicit but requires fair distribution among all staff. 

• Enforcement: Both provide for complaints to be made (to tribunals in the UK, to the Workplace Relations Commission in Ireland), but the UK’s regime includes specific compensation limits and a statutory Code of Practice. 

• Service charges: Both Acts require that mandatory service charges be treated as tips for distribution purposes. 

• Deductions: Ireland’s Act allows employers to deduct certain costs from tips received electronically whereas the UK’s Tipping Act specifically prohibits such deductions. 

• Review mechanism: Ireland’s Act requires a statutory review to assess effectiveness and consider further measures. 

Conclusion

The first year of the UK’s Tipping Act has brought greater clarity and fairness to tipping practices, aligning the UK more closely with Ireland’s recent reforms. Both jurisdictions now provide robust protections for workers, but differences remain in scope, enforcement, and the handling of cash tips. As both regimes mature, further refinements are likely, informed by ongoing reviews and the practical experiences of employers and workers alike. 

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