A consultation has been launched by the Department for Business, Innovation, Science and Trade (DBIST) on the revised statutory updated Code of Practice on Fair and Transparent Distribution of Tips.
The Code has been in place since 1 October 2024 and is now being updated under the provisions of the Employment Rights Act 2025.
This is not the first time a draft of the revised Code has been published. Earlier this year the Government published the first version of the draft updated Code. However, it was withdrawn following concerns that it did not go far enough. The Government is now seeking views on a new version of the draft updated Code.
New requirements are introduced for worker involvement. Employers will have to consult with workers when creating or reviewing tipping policies (to happen every three years). This must be genuine, proportionate and carried out in good faith. This includes ensuring there is enough time for workers to be fully informed on the proposals, and to enable all workers to get their say on them. A written record will have to be kept of the consultation, with an anonymised summary of consultation feedback to be shared with workers after.
Clarification is offered in the updated Code also that when it comes to service charges, the substance of a payment matters more than its label. They should not be renamed in an attempt to circumvent the rules.
The updated Code also sets out that fair distribution should be judged across the scheme as a whole and will usually include workers directly involved in providing the customer service or experience, which may include front and back-of-house, agency, temporary, part-time or zero-hours workers. Employers should use caution if using fixed or guaranteed tip allocations for specific workers or roles.
The policy, the updated Code states, should explain how tips are accepted, allocated and distributed, and set out how fairness, transparency and consultation will be handled in relation to tips. It must be equally accessible to all workers, including agency workers. Employers may also consider sharing it with customers. Data protection, the Code makes clear, should not be used as a blanket reason to withhold relevant information.
The consultation is open until 29 September 2026 for comments from stakeholders. Following that the revised version will be before Parliament for approval. New tipping rules are expected to come into force by the end of 2026.
