New Consultation Requirements for Tipping Policies Coming in October 2026
The government has published its response to the consultation on strengthening the law on tipping, together with an updated draft Code of Practice on the fair and transparent distribution of tips.
The changes reflect additional employer obligations introduced by Section 14 of the Employment Rights Act 2025 (ERA 2025). These updates build upon the reforms already introduced by the Employment (Allocation of Tips) Act 2023 and the statutory Code of Practice on Fair and Transparent Distribution of Tips. The changes are expected to come into force in October 2026.
For employers in the hospitality, leisure, restaurant, hotel, and service sectors, where tips, gratuities, and service charges are common, this is a significant compliance development. Albeit one that builds on prior legislative movement toward greater transparency and lesser employer discretion in this area.
What Changed Under the Employment (Allocation of Tips) Act 2023?
The Employment Act 2023 introduced significant reforms to ensure the fair and transparent distribution of tips, gratuities, and service charges. Following this, employers should already be:
- Allocating tips, gratuities and service charges fairly to workers at the same site of operation.
- Adhering to the statutory Code of Practice on Fair and Transparent Distribution of Tips which was effective from 1 October 2024.
- Ensuring that workers, including any agency workers, are treated fairly and have access to enforcement mechanisms in case of non-compliance.
What Are the New Tipping Consultation Requirements for Employers?
The new obligations for employers, when preparing or reviewing a tipping policy, are covered in Section 14 of the ERA 2025 and are as follows:-
- Employers must consult any recognised trade unions or elected employee representatives when introducing or reviewing their tipping policy. Where no such representatives exist, employers should consult workers directly.
- Ensure tips are distributed in a fair and transparent manner when the employer takes control over their distribution.
- Consultation will not be a one-off exercise. Employers will be required to consult whenever their tipping policy is reviewed and maintain a written policy on how tips are dealt with. Such reviews must take place at least once every three years.
- Employers will also be required to provide all employees with an anonymised summary of the consultation process and the feedback received within it. This summary should explain the views expressed in the consultation and the outcome reached following the consideration of employee feedback.
What Does Appropriate Consultation Look Like?
The updated draft Code makes clear that consultation should be genuine, proportionate, inclusive and transparent. While Employers are not required to adopt every suggestion put forward by workers, they should be able to demonstrate that all views have been properly considered, including those from minority groups.
The aim should be broad agreement that the method of allocating tips is fair, reasonable and transparent, with employees having a genuine opportunity to contribute to the decision-making process.
In practice, consultation can take many different forms depending on the size and structure of the organisation. This could include:
- Staff meetings;
- Group discussions;
- Employee surveys; or
- A combination of consultation methods
Employers should ensure that the process is accessible to all workers and that participation is encouraged without any form of undue influence.
What Should Employers Do Now?
While the new provisions are not expected to take effect until October 2026, employers should use the lead-in period to review their existing practices and prepare for compliance.
Employers should:
- Review any existing tipping policy and ensure it clearly explains how tips, gratuities and service charges are allocated.
- Identify who should be consulted, whether that is a recognised trade union representative, elected employee representatives or workers directly.
- Design a consultation process that is proportionate, inclusive and accessible to all staff.
- Implement procedures to record consultation meetings, feedback received and decisions made.
- Schedule regular policy reviews to ensure the statutory three-year review requirement is not missed.
Taking proactive steps now will help organisations demonstrate compliance, reduce the risk of disputes and ensure that tipping practices are fair, transparent and supported by their workforce.
Frequently Asked Questions
When do the new tipping consultation rules come into force?
The new consultation requirements are expected to take effect in October 2026. Employers should use the lead-in period to review their existing tipping policies and prepare for the new legal obligations.
Which employers are affected by the new tipping legislation?
The rules apply to employers who control or influence the distribution of tips, gratuities or service charges. They are particularly relevant for businesses in the hospitality, leisure, restaurant, hotel, café and bar sectors, where tipping forms part of employee earnings.
Do employers have to consult employees every time they review their tipping policy?
Yes. Consultation is not a one-off exercise. Employers must consult workers whenever a tipping policy is reviewed, whether through recognised trade unions, elected employee representatives or directly with employees where no representatives exist.
What does a fair consultation process look like?
The updated draft Code of Practice states that consultation should be genuine, transparent, proportionate and inclusive. Employers should give workers a meaningful opportunity to share their views and demonstrate that all feedback has been properly considered before decisions are made.
What happens if an employer does not comply?
Employers who fail to comply with tipping legislation risk Tribunal claims, which can result in financial penalties.
Can employees challenge an unfair tipping policy?
Yes. If Employers fail to comply with the statutory code, employees can challenge the policy.
How can employment solicitors help?
Employment law specialists can help employers draft or update tipping policies, review existing practices, advise on consultation requirements, minimise legal risk and ensure compliance with the latest employment legislation before the October 2026 deadline.
How Our Employment Law Team Can Help
Preparing for the new tipping legislation now can help avoid disputes and ensure your business remains compliant.
Our expert employment team can assist with:
- Drafting or updating compliant tipping policies, incorporating them into existing employee handbooks, ensuring they clearly explain how tips, gratuities and service charges are collected, allocated and distributed.
- Reviewing existing policies and practices to identify any areas of non-compliance and provide clear advice on the changes required ahead of October 2026.
- Providing advice on implementing consultation processes
We urge employers, in affected sectors, to review their current policies and begin planning for these changes as soon as possible. Early preparation will help ensure a smooth transition and minimise the risk of non-compliance once the new regime takes effect.
