Holmes Mackillop advises hospitality operators to review tipping policy ahead of Employment Right Act enforcement
Holmes Mackillop Solicitors is advising hospitality operators to review their tipping policy ahead of the Employment Rights Act (2025), labelled the biggest shake-up of employment law in a generation, coming into force.
From October 2026, employers must consult with staff or their representatives before creating a tipping policy and update their policy every three years.
Since the Employment (Allocation of Tips) Act came into force in 2024, tipping has been more heavily regulated. Employers must now pass tips to workers without deductions apart from tax and national insurance, share tips between workers in a fair and transparent way, keep records of tips, and have a written policy on the topic.
The treatment of tips has also been the subject of several employment tribunal cases, including the notable case of Palanki vs The Big Table Group (t/a Las Iguanas) where the tribunal found that an employee’s tips should have been taken into account when calculating his holiday pay, hence his holiday pay should have included his daily salary plus the average tips he would normally receive for a day’s work.
While this decision is not necessarily binding for future decisions and a future tribunal may take a different view, it speaks to the weight that is now being placed on tips, particularly where they account for a large chunk of an employee’s take-home pay.
In its decision, the tribunal highlighted that workers should not be deterred from taking holidays because they would be financially disadvantaged as a result, for example, through a loss of tips.
Sophie Brown, trainee solicitor at Holmes Mackillop, said: “Many aspects of employment law, including tipping, are constantly evolving; not least with the introduction of the new Employment Rights Act.
“Particularly in industries such as hospitality and leisure, where tips may form a substantial part of employees’ overall benefits, employers should be mindful of their obligations regarding tipping. Employers should conduct reviews of their policies to ensure they abide by current regulations and are prepared for the new rules to emerge soon.
“We can advise employers how they can ensure they are up to date with the current regulations on tipping, as well as other significant employment law changes coming into force through the Employment Rights Act.”
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For further information please contact Sophie Brown tel 0141 226 4942