By law, employers must share tips, gratuities and service charges between employees in a fair and transparent way. This applies if an employer has 'control or significant influence' over how tips are divided.
The law is the Employment (Allocation of Tips) Act 2023.
The Code of Practice on fair and transparent distribution of tips accompanies the law.
An employer might have their own policy on tips, but the Code is the minimum procedure they must follow. If a case reaches an employment tribunal, the judge will consider whether the employer has followed the Code of Practice.
Being fair
The Code of Practice sets out principles to help employers decide how to divide tips fairly between employees.
For example, it says that:
- fairness does not mean employees must give the same proportion of tips to all employees
- employers should use clear and objective factors when deciding how to share out tips
What's fair will depend on:
- the type of workplace
- the jobs people are doing
- what's agreed with employees and their trade union or representatives, if they have them
Employers should consult with employees and any trade unions when deciding how to share out tips.
Read the Code of Practice on fair and transparent distribution of tips on GOV.UK
Example – considering factors for fairness
A sit-down pizza restaurant is open for lunch and dinner.
It might use the following factors to share out tips fairly:
- the time of day the tips are paid and how busy service is
- whether an employee serves tables, works in the kitchen or at the bar and how busy each area is
- whether certain employees have more responsibility, for example a head waiter
- whether any individuals or teams perform to a higher standard or get any complaints
Being transparent
Employers must make clear in a written policy how they divide tips fairly. They should also make this clear in employment contracts.
Employers must keep records of tips.
Find out more about policies and records
Discrimination
Employers must not discriminate in the way they share out tips.
Employers should carefully consider whether factors for sharing out tips would discriminate against anyone.
Employers should discuss how to avoid discrimination when they consult with employees or their representatives on how to share tips fairly.
Find out more about discrimination at work
Agency workers
Employers should treat agency workers in the same way as other employees.
When an agency worker starts their assignment, the employer or agency should:
- make them aware of the tips policy
- make sure they understand who they can raise concerns with or ask questions about tips
Paying tips to agency workers
Employers can either:
- pay tips directly to the agency worker
- pay tips to the agency first, who passes them onto the agency worker
If the employer pays tips to the agency worker directly, they must pay them at the same time as other employees. This is by the end of the month after the month the tips are received.
If the employer pays tips to the agency first, they must do this at the same time as paying other employees. The agency must pass the tips onto the worker. They must do this no later than the end of the month after the employer passed on the tips.
If tips are not shared out fairly
There are steps an employee can take if their employer or a tronc is not sharing out tips fairly.
It's a good idea to raise the problem informally first. They can do this by talking with their employer. This can help resolve a problem quickly if there's been a misunderstanding or mistake.
An employee can raise a grievance if:
- raising it informally does not resolve the problem
- they feel the problem is too serious to deal with informally
A grievance is where an employee makes a formal complaint to their employer.
If the problem is still not resolved, they might be able to make a claim to an employment tribunal.
If an employee's tribunal claim is successful, an employer might have to take action for other employees who are affected. The other employees do not need to have made a claim.