Tipping update for the hospitality sector: new consultation duties due to commence in October 2026

The government’s long-awaited response to its consultation on strengthening tipping legislation has now been published, together with a revised draft statutory Code of Practice. Subject to parliamentary approval, the changes will come into force in October 2026 and will introduce new obligations for the hospitality sector, including hotels, restaurants, bars and leisure operators.

The current tipping regime, introduced in October 2024, already requires employers to pass on qualifying tips, gratuities and service charges in full and ensure they are allocated fairly, these new measures place a far greater importance on employee consultation and transparency.

For employers in the hospitality sector, now is the time to review existing tipping arrangements and consider whether the necessary consultation processes are in place ahead of implementation.

What are the current rules?

The Employment (Allocation of Tips) Act 2023 introduced a number of important protections for workers, including requirements that employers:

• pass qualifying tips, gratuities and service charges to workers in full;
• allocate tips fairly;
• maintain a written tipping policy where tips are received on more than an occasional basis; and
• keep records of tip allocation and distribution.

The revised Code does not replace those obligations. Instead, it builds upon them following amendments introduced by the Employment Rights Act 2025.

What is changing?

The most significant change for employers in the hospitality sector is the introduction of a statutory duty to consult workers when developing or reviewing a tipping policy.

From October 2026, employers will be required to:

• consult with recognised trade unions, elected worker representatives or, where none exist, workers directly when developing a tipping policy;
• consult again whenever the policy is reviewed;
• review their tipping policy at least once every three years (and consult again); and
• provide workers with an anonymised summary of the consultation and the views expressed.

The government has made clear that this consultation must be meaningful rather than a “tick-box” exercise. The revised Code states that consultation should be genuine, transparent, inclusive and proportionate, with employers allowing sufficient time for workers to participate and express their views.

Importantly, employers are not required to adopt every suggestion put forward by workers. However, they should be able to demonstrate that feedback has been properly considered before a final decision is reached.

Why does this matter for hospitality businesses?

Many hospitality operators already have established approaches to sharing tips, whether through a tronc arrangement, service charge distribution model or another allocation method. Historically, some employers have determined those arrangements centrally, however, the new rules require a greater degree of workforce engagement.

The revised Code indicates that worker support for a particular allocation method may assist an employment tribunal when assessing whether a system is fair and reasonable. Conversely, a tipping arrangement introduced without meaningful consultation may become more vulnerable to challenge.

This is likely to be particularly relevant in businesses where different groups of workers have competing interests. For example:

• front-of-house and back-of-house staff;
• restaurant and housekeeping teams within hotels;
• permanent and seasonal workers; and
• employees working across multiple venues or departments.

Employers will be expected to consider the views of all affected groups, including minority viewpoints, when determining how tips are allocated.

Additional clarification from the revised Code

The revised draft Code also provides some useful guidance on issues that have generated uncertainty since the original legislation came into force.

The revised Code confirms that:

• employers should not attempt to avoid the legislation by relabelling tips, gratuities or service charges under a different name;
• tips should generally be distributed amongst workers who directly contribute to the customer experience, including those who personally prepare, handle, serve or provide the hospitality being purchased;
• employers should exercise caution before guaranteeing a fixed minimum allocation of tips to particular individuals or categories of worker; and
• basic pay may be one of several factors considered when determining a fair method of allocation.

The Code also reinforces existing transparency obligations. Employers should maintain records of consultations undertaken and must provide tipping records within four weeks of a valid request.

What should employers be doing now?

Although the changes are not expected to take effect until October 2026, businesses in the hospitality sector should start preparing now.

In particular, employers should consider:

• reviewing existing tipping policies and distribution arrangements;
• deciding how future consultations with staff will be carried out;
• putting in place a process for recording consultation feedback and outcomes;
• planning for the mandatory three-year policy review; and
• ensuring managers understand the increased focus on consultation and transparency.

For larger hospitality businesses and hotel groups, it may also be worth considering whether existing employee forums or representative bodies can support future consultation requirements.

Looking ahead

The government’s latest reforms make it clear that tipping arrangements must not only be fair, but also have the confidence of the workforce.

For employers in the hospitality sector, this means focusing not only on how tips are distributed, but also on how decisions about tip allocation are made. Businesses that review their arrangements and establish effective consultation processes now will be best placed to comply with the new requirements when they come into force in October 2026.

How we can help

If you would like to discuss any of the issues raised in this article, or would like advice on reviewing tipping policies, consulting with employees or complying with the forthcoming changes, please contact Sarah Glockler or a member of our employment team.