UK Tipping Law Changes: What Card Merchants Should Know?
UK tipping laws have changed. Are you ready? We've got the essentials you need to stay compliant, all in one place.
The laws on tipping have changed recently, with new legislation aimed at ensuring fairness and transparency for workers.
It’s vital for employers to understand these changes, what they mean for your business and how your card machine can help you to comply.
What is the new tipping law?
The Employment (Allocation of Tips) Act 2023 came into force on 1st October 2024 and applies in England, Scotland and Wales.
The main aim of the legislation is to ensure that employers allocate tips, gratuities and service charges to workers in full and in a fair and transparent way.
What does the tipping law cover?
Fair allocation: Employers must ensure that all tips (including those paid via card) are allocated fairly among workers.
No deductions: Employers must make payment in full (except for statutory deductions).
Prompt payment: Payment must be made by no later than the end of the month following the month in which the customer paid the tip.
Tipping Code of Practice: The Government has issued a statutory Code of Practice on the Fair and Transparent Distribution of Tips.
Tipping Policy: Employers must have a written policy setting out how it deals with tips (unless it only receives tips occasionally) and keep records of how tips are allocated for 3 years.
Transparency: The tipping policy and tipping records must be made available to workers on request.
No contracting out: Employers cannot require workers to contract out of the new law or reimburse the employer for tips paid.
What happens if merchants don’t comply?
Non-compliance with the new tipping law can result in several consequences:
Employment tribunals: Workers can complain to an employment tribunal, which has the power to order the employer to:
• Revise the allocation (and the employer cannot recover any overpayment)
• Make payments to all affected workers
• Pay compensation of up to £5,000 for any financial loss suffered by the employee because of the breach.
Reputational damage: In a time when fairness and transparency matter more than ever, not following the rules could hurt your business. Unfair tipping practices can spread fast, leading to bad press and a loss of customer trust.
Loss of talent: Employees who feel they aren’t receiving their fair share of tips may choose to work elsewhere, especially in sectors like hospitality and retail, where tips can form a substantial part of income.
How can I ensure that my business is compliant?
To avoid the risks and penalties associated with non-compliance, here are some steps you can take:
Review your tipping policy: Ensure your business has a clear, documented tipping policy that aligns with the new legislation. Make sure this policy is transparent and accessible to both staff and customers.
Education, education and education: Educate both management and employees on the new tipping law and how tips will be handled. This ensures everyone is on the same page and prevents disputes.
Keep detailed records: Maintain clear and accurate records of all tips received and how they are distributed. In case of any disputes or audits, you’ll need to provide evidence of compliance.
Consult legal advice: If you’re unsure about how to implement these changes, consider seeking legal counsel to ensure that your business remains compliant with the new tipping law.
What are the potential benefits for merchants?
Staying compliant isn’t just about avoiding fines—it’s about doing the right thing. Fairness and transparency are key to keeping employees happy, providing a good service and building trust with your customers.
Employee morale: When tips are shared fairly, employees feel valued. This boosts morale, improves service, and helps you keep great staff around longer.
Customer trust: Customers care about fairness too. By following fair tipping practices, you show them you care, which can increase loyalty and bring them back for more.
Fair treatment goes hand in hand with a healthy work environment. For more ways to keep your staff motivated and your business strong, check out our wellbeing tips for small business owners.
Now’s the time to act
By taking proactive steps now, you can ensure your business is prepared for the changes and set up for long-term success.
It’s time to review your systems, train your staff, and ensure that, when the new tipping law comes into force, your business is fully compliant and ready to thrive.
By staying ahead of these changes, merchants can protect their business, enhance employee satisfaction, and foster a better experience for their customers.
The information in this article is provided for information purposes only and should not be relied on or treated as legal advice.
How can Clear Business help?
With a Castle Saturn card terminal from Clear Business, staying compliant is one less thing to worry about thanks to the card terminal’s tipping functionality.
By enabling the tipping functionality on the CastlesPay app, along with Server ID, you can accurately track which servers have collected which tips and ensure these can be easily reconciled. This helps your business stay compliant with the regulation change.
Get started with server ID setup
If you’re a Clear Business payments customer, with a Castles Saturn terminal, download our guide on how to set-up Server ID below.
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