Nine months on: how the tipping legislation is reshaping hospitality
By Peter Davies, Partner – Hospitality, Moore Kingston Smith
It has been nine months since the long-awaited tipping legislation came into force on 1 October 2024.
For many hospitality operators, it marked a formal shift towards something they were already striving to achieve: greater transparency, fairness and clarity around how tips are shared. For others, it prompted a much-needed rethink of long-standing practices.
Since the changes landed, we have been working with businesses of all sizes across the hospitality sector to help them get to grips with the new requirements. In some cases, they have used the legislation as a catalyst for wider improvement. Here’s what we’ve learned so far.
A quick recap: what changed?
The legislation sets out clear standards for how employers must handle tips, gratuities and service charges.
Its aim is to ensure these payments go to the workers who earned them, without being skimmed off for admin or card processing fees.
At its core, the legislation requires employers to:
- pass 100% of tips to staff, with no deductions;
- distribute tips fairly and transparently;
- have a written tipping policy in place;
- pay out tips no later than the end of the following month;
- keep detailed records for three years; and
- provide information to staff on how tips are handled and distributed.
Workers can now request information on their tips and challenge practices they believe to be unfair. It has created a more formal accountability framework, which is a step forward for both workers and employers alike.
How has the industry responded?
In many cases, the change simply formalised what good employers were already doing.
Plenty of operators had established policies, shared tips fairly, and worked transparently with their teams. For them, the shift was about documenting and tightening up processes, not starting from scratch.
For others, especially smaller independent venues, the changes felt more disruptive. Some flagged the additional admin burden, such as monthly reconciliations, payroll changes and tip logs, as a challenge. But many have since told us that the effort was worthwhile. Once the right systems were in place, they found the benefits often outweighed the costs.
Where tipping processes are well communicated and clearly documented, we’ve seen a tangible boost to team morale. Staff are more confident in how tips are handled, and that sense of fairness plays directly into engagement and retention, two areas under real pressure across the sector.
Putting it into practice
Take, for example, a family-run café in Birmingham that used to split tips ad hoc at the end of each shift.
Under the new rules, they introduced a monthly distribution model based on time worked. They now use a shared spreadsheet and rota to track hours, and haven’t looked back. “It’s actually easier than what we used to do,” the owner told us. “And the team trust it more.”
Pitfalls to watch out for
While the overall direction of travel is positive, there are a few common pitfalls we continue to see.
Agency workers are sometimes overlooked in tip distributions, even though they’re entitled under the legislation. This can be a particular grey area if records aren’t detailed or if the agency contract is ambiguous.
Likewise, some businesses are still unintentionally breaching the rules by allocating tips to kitchen or back-office staff without a clear policy that supports it. While fair distribution models can include non-customer-facing staff, it needs to be set out in the written policy and based on objective criteria.
Finally, record-keeping is a must. It’s not just about compliance. It’s your audit trail. Make sure records show who received what and when, and that you can evidence how the calculation was made.
What’s next?
The legislation is still bedding in, but we’re already seeing the more forward-thinking operators go a step further.
Some are using tipping data to inform workforce planning or reward high-performing teams. Others are reviewing their broader employee proposition, seeing tips as part of a wider value conversation.
What’s clear is that this is not just a compliance exercise. It is a culture shift. Done well, transparent tipping policies can support recruitment, improve retention and enhance your reputation with both staff and customers.
Final thought
The hospitality sector is no stranger to change, and the tipping reforms are just one more evolution in how we do business.
Nine months on, the signs are encouraging: more fairness, more clarity, and, in many places, a better deal for workers.
If you’ve yet to revisit your tipping policy, now is a good time to check in. Are you compliant? Is your team confident in how tips are handled? Could the system be fairer or clearer?
Moore Kingston Smith are always here to help you make sense of the detail.
Just as importantly, they can help you turn compliance into opportunity.
