WMT Troncmaster Services managing director Peter Davies said the biggest impact has been cultural. “It should now have created a level playing field, which means the good businesses know they are not being undercut by bad businesses,” he said.
“Staff know they should be receiving all of the money, and consumers should know that if they choose to tip or pay service charges, that money is going to the team who have contributed to their experience.”
The legislation, introduced on 1 October 2024, requires employers to pass 100% of tips to staff, distribute them fairly and transparently, and pay them out by the end of the following month.
Divided opinion
While Davies said most businesses understand the rules, definitions of fairness and transparency continue to divide opinion. “You must give all of this money to your staff - that was a really simple and clear message,” he said. “The problem is those two words are vague and subjective.”
He pointed to the code of practice’s four guiding words: clear, consistent, objective and reasonable. “If you keep those four words in mind and at the forefront of what you do, you are probably going to be in the right place.”
Transparency has also created tension with data protection. “This does not supersede the Data Protection Act,” Davies added. “Transparency means understanding what you get, how it’s worked out and why, but it doesn’t mean you can see what your colleagues earn.”
Tips rise by 7%
Before the legislation was enforced, it was reported that less than a third of hospitality businesses were ‘currently compliant’ with the law .
Davies said since it has come into effect, overall distribution to staff has risen: “When the new legislation came in, the amount of money being shared out around teams went up by around 7%.”
Night Time Industries Association (NTIA) chief executive Michael Kill said the sector has adapted well despite economic pressures.
“A year on from the introduction of tipping legislation, we have seen a noticeable shift towards greater fairness and transparency,” he said.
“But it’s vital that Government and industry continue to work together to balance these ideals with the tough economic conditions businesses are facing.”
British Institute of Innkeeping (BII) chief executive Steve Alton agreed that the legislation has delivered clear benefits for staff.
“There have been many positive changes for hospitality staff around the introduction of the Employment (Allocation of Tips) Act last year,” he said. “Now, more than ever, it is vital we make the most of the significant benefit tips provide to our teams.”
The next phase
Attention is now turning to tribunal cases expected to define what “fair” and “transparent” really mean.
One of the first is the Ivy Collection case, which will examine whether the group’s tronc system met the new legal standards for fair and transparent distribution of tips.
“The Ivy case is the first real case where the tribunal is going to have a look at those words,” Davies said. “Whether the claimant wins or loses, there will be important lessons for everybody because it will deliver a bit more clarity.”
Access Hospitality general manager Anthony Tattersall said the bill has “made fairness and transparency around tips a legal requirement, not just a nice-to-have. It ensures 100% of gratuities left by customers reach workers and that the allocation of those monies is dealt with fairly.”
“However, it’s also created new challenges, especially with recent rulings around holiday pay. Over the next 12 months, the main risks businesses could face are an increase in payback claims, administrative burdens with the need to rework contracts and policies, as well as upskilling staff on the new legislation.”
Looking ahead, Davies said minor amendments to the law are already on the horizon. “There are going to be some changes to the legislation next year,” he said. “At certain predefined periods there have to be formal consultations with team members about the tipping policy in a business.”
The new requirement, expected in October 2026, will mandate structured staff engagement on how tips are managed and distributed.
UKHospitality chair Kate Nicholls said: “With further changes expected to tipping legislation, through the Employment Rights Bill, we will continue to work with the Government on this and ensure the changes work effectively and don’t add red tape to the system.”
In the meantime, Davies advised operators to maintain open communication with their teams. “Businesses need to give information to their team, engage with them, talk to them, and be as open as they can be,” he said. “Anyone who is not talking to their staff is sooner or later going to bubble up a problem.”
