When you add a discretionary tip or accept a service charge at a London restaurant, the law now says how that money must reach staff. This article explains the rules in force since 1 October 2024, what they cover, and what they leave out.
What changed for tips on 1 October 2024?
The Employment (Allocation of Tips) Act 2023 inserted a new Part 2B into the Employment Rights Act 1996. According to the official UK legislation database, the Act was partly in force from 31 July 2023 for specified purposes and fully in force from 1 October 2024. The same date is given for the accompanying statutory code of practice, which GOV.UK says was published on 29 July 2024 and applies in England, Scotland and Wales.
The central duty is set out in the new section 27D: employers must ensure that tips, gratuities and service charges are allocated fairly between their workers at that place of business, and the amount allocated is payable to the worker by the employer. In deciding what is fair, the relevant parts of the code must be taken into account.
In short, the money a diner hands over for service is no longer a matter of house custom alone. It is a legal obligation with a paper trail.
Which payments count as a “qualifying” tip?
The legislation uses the term “qualifying tips”. These include payments the employer receives, whether directly, through an associated person, or through a third party under a payment arrangement. They also include tips that a worker receives where the employer controls or significantly influences how they are allocated.
GOV.UK’s code makes the practical test plain: a tip qualifies if the employer receives it, or controls or significantly influences its distribution. The method of payment is not the deciding factor. The code states that it covers all tips, gratuities and service charges, including both automatic and voluntary service charges, and it applies to all workers, including agency workers, though not to people who are self-employed.
Non-cash tips can also count where they are vouchers, tokens or similar items of fixed monetary value that can be exchanged. The code gives a casino chip with a fixed, exchangeable value as an example.
Does the money you leave in cash count differently?
Often it does. Under the code, cash tips are qualifying where the employer tells staff how to share them, or collects and distributes them through shifts or payroll. A cash tip that a worker simply keeps, with no employer involvement, falls outside the rules. So does digital tipping that bypasses the employer altogether.
Card, app and QR-code tips are different. The code says these are usually received by the employer, so the employer must distribute them fairly.
| Type of tip | Usually inside the rules? |
|---|---|
| Discretionary tip added to a card bill | Yes, as the employer receives it |
| Automatic or optional service charge | Yes, covered explicitly |
| Cash collected in a jar and shared under house rules | Yes, if the employer directs the sharing |
| Cash handed to one worker who keeps it, with no employer role | No |
| Tipping that bypasses the employer entirely | No |
This is a summary of the code’s approach rather than a legal ruling on any particular venue, and individual circumstances can change the answer.
What does “fair” mean when shares are not equal?
The code does not require equal shares. It says the factors used to divide tips must be clear, objective, fair and reasonable. Possible factors listed include the type of role, basic pay, hours worked in the tip period, individual or team performance, seniority and length of service, and customer intention. The list is illustrative, not exhaustive.
Employers must also avoid unlawful discrimination, including indirect discrimination. The code expects them to consult workers, to state the factors in the tipping policy, and to review their approach regularly.
A worked example
Take an illustrative restaurant that collects £1,000 in card tips in one week and shares them by hours worked among three staff members.
| Worker | Hours worked | Share of hours | Share of tips |
|---|---|---|---|
| A | 40 | 40% | £400 |
| B | 30 | 30% | £300 |
| C | 30 | 30% | £300 |
Hours total 100, so each worker’s share of the pool equals their hours as a percentage, and the shares sum to £1,000. A different, equally lawful method might weight by role. What matters under the code is that the method is stated, objective and applied consistently.
Can an employer take a cut?
Only in very narrow circumstances. The code states that tips must be passed to workers without deductions, except in very limited cases such as income tax. For agency workers, the employment agency must pass tips on without unauthorised deductions.
This is a notable shift for diners who assumed a venue might keep a portion to cover card-processing costs or breakages. Under the code, the starting position is that the tip belongs to the workers.
How quickly must tips be paid out?
The code sets a clear outer limit: tips must be distributed no later than the end of the month after the month in which the customer paid them. Its own example is a tip paid on 23 June, which must be distributed by 31 July.
Distribution can happen directly through payroll, or through a tronc, which is a pooled fund. An employer may appoint a tronc operator, who could be a staff member, an external payroll or accountancy firm, or an elected or agreed staff representative. Independence matters: if the employer reasonably believes the tronc operates fairly and independently, it is regarded as complying with the code, but it must act if it later learns otherwise.
What records and policies must a venue keep?
Where qualifying tips are paid on more than an occasional and exceptional basis, the code requires a written tipping policy. It must cover how tips are accepted, allocated and distributed and what steps ensure fairness and transparency. It should be written in plain language, available in an accessible format on request, and available equally to all staff, including agency workers.
Employers must also keep a record of all qualifying tips received at the place of business and the amount allocated to each worker. Those records must be kept for three years from the date the tip was paid, and handled in line with data protection law.
What can staff ask for, and where do disputes go?
Any worker, including an agency worker, who worked for the employer for the full period in question can make a written request for tipping records. According to the code:
- A worker may make one request in any three-month period.
- The request can look back up to three years.
- The employer’s response covers the total qualifying tips received at that place of business in the period and the amount allocated to the requesting worker. Other workers’ individual amounts are not included.
Employers are expected to run fair internal processes and to follow the Acas code on disciplinary and grievance procedures. If a complaint is unresolved, it can go to an employment tribunal. The code says a tribunal can make a public declaration, order a revised allocation, make a non-binding recommendation, or order compensation, including for other workers who did not complain.
The code does not specify a time limit within which an employer must reply to a records request, and GOV.UK says further non-statutory guidance is planned.
What this means for how you dine
These rules govern employers, not diners, so nothing about your own choices is regulated. But they do change what a service charge or card tip represents. In a venue that falls within the law, the money is expected to reach the team under a documented method, within a defined period and without deductions beyond tax.
That is also a reminder that a dining room’s economics sit alongside its atmosphere. The restaurants discussed in our piece on where London’s business deals actually happen depend on staff who read a table well, and how those staff are paid is part of that picture. Similarly, the late-night economy examined in what the Nightlife Taskforce wants changed relies heavily on tipped and service-charge-linked work. Wider workplace change is covered in what the Employment Rights Act means for employers.
Analysis: the practical value of the regime is transparency. Diners cannot audit a restaurant’s tronc, but staff now have a route to ask for the figures, and employers have a written standard to meet.
A clearer line between a gift and a payroll item
The 2024 changes turn the tip from an informal courtesy into a regulated flow of money with defined timing, records and remedies. Cash kept directly by a worker and tipping that bypasses the employer remain outside the framework, so the picture is not uniform across every table in London. For readers, the useful takeaway is simple: a card tip or service charge is, in law, intended for the people who served you.
This article offers general information, not personalised financial or legal advice; rules and rates change.
Sources: GOV.UK; UK Legislation
