Employers banned from withholding tips from UK staff

More than 2 million UK workers will take home an estimated £200 million more, as employers are banned from withholding tips under the Employment (Allocation of Tips) Act 2023, which received Royal Assent on 2 May 2023. Measures are expected to come into force in 2024, following a consultation and secondary legislation.

Many hospitality workers rely on tips to top up their pay and are often left powerless if businesses don’t pass on service charges from customers to their staff.

This Bill makes it unlawful for businesses to hold back service charges from their employees, ensuring staff receive the tips they have earned.

This overhaul of tipping practices is set to benefit millions of UK workers across the hospitality, leisure and services sectors, helping to assist them with the UK cost of living pressures.

UK Business and Trade Minister Kevin Hollinrake said: “It is not right for employers to withhold tips from their hard-working employees. Whether you are pulling pints or delivering a pizza, this new law will ensure that staff receive a fair day’s pay for a fair day’s work – and it means customers can be confident their money is going to those who deserve it. Thanks to all the campaigners who have helped make the Tipping Bill a reality and are helping to improve the lives of workers across the UK.”

Current assistance includes the National Living Wage which was increased in April by 9.7 per cent, and the Energy Price Guarantee which was extended to keep energy bills at £2,500 for a typical household until the end of June 2023.

Government guidance:

If you get tips at work they do not count towards the National Minimum Wage. You still have to pay Income Tax on tips and may have to pay National Insurance.

How tips are paid

You could get tips:

• directly from a customer in cash or electronically, for example through a mobile app
• as part of your pay packet from your employer
• through a separate system for managing and sharing out tips at your workplace (known as a ‘tronc’)

How your employer handles tips

The government has a Code of Best Practice on tips that says how your employer should handle them.

Your employer does not have to follow it, but if they do they should have a policy on tips that includes information on:

• how tips are distributed or shared
• the name of the person responsible for managing tips (if there is one)
• if tips paid directly to staff members by customers are treated differently
• any deductions taken from tips
• what happens during leave, for example holidays, sick leave, parental leave

Where to get help

Contact Acas if you have a question about tips or the National Minimum Wage.

Read the full UK Government announcement