Employment Rights Bill bitesize: tips and gratuities

The Employment Rights Bill was published on 10 October 2024, setting out a wide range of ambitious workplace reforms. For an overview of the Bill, see our ‘headlines’ article. 

In this series of ‘bitesize’ articles, we look at different key provisions of the Bill in more detail, consider the implications for employers and explain what the next steps will be.  

Tips and gratuities: what does the Bill say? 

On 1 October 2024, a new Code of Practice on the fair and transparent distribution of tips came into force, as a result of the Employment (Allocation of Tips) Act 2023. The Act introduced new obligations for employers to ensure that workers receive tips, gratuities and service charges in a fair and transparent way. Where qualifying tips, gratuities and service charges are paid, employers should now have a written policy on how they deal with them. For an overview of the new Code of Practice, see our recent article. 

Prior to the General Election, Labour stated in its Plan to Make Work Pay an intention to “strengthen existing tipping law”. The Employment Rights Bill therefore introduces a new requirement for employers to consult about their tipping policy with recognised trade union representatives, workers’ representatives of workers likely to be affected by the policy, or if there are no trade union or worker representatives, they should consult with workers directly.  

Employers will also need to review their tips policy at least once every three years. This three-year review cycle will begin from the date the initial version of the policy is implemented, including those policies already in place before the new rules take effect. 

Additionally, the Bill introduces a requirement that employers provide all workers with an anonymised summary of the feedback received during the consultation process. This summary must be made available at the business location where the tips policy is implemented. 

What does this mean for employers? 

With many employers still getting to grips with the new obligation to ensure the fair distribution of tips and taking steps to comply with the recent Code of Practice, the provisions under the Bill will add a further level of complexity for employers to ensure compliance with the rules. 

It will mean that employers who have recently introduced a new policy on tips will need to ensure they schedule a review of the policy within the three-year anniversary (probably in 2027) and undertake the necessary consultation with their workforce. 

What are the next steps? 

The Bill is expected to receive Royal Assent in 2025, with most reforms expected to take place in 2026 (likely following consultation on a revised Code of Practice).  

Employers will therefore have the opportunity to take advantage of a relatively long lead-in period in order to prepare for the changes and review existing policies and procedures.