The Employment (Tips, Gratuities and Service Charges) Act, which came into force in October 2024, imposed a legal obligation on UK employers to pass all tips and service charges to workers in full and without deductions, alongside a requirement to maintain a written tipping policy and make it available to staff on request. The Act was the culmination of years of campaigning by hospitality workers and unions and was broadly welcomed by the sector — in principle. The practical implementation has been, as is often the case with hospitality regulation, more complicated.
The Paymentsense data, drawn from a survey of 1,400 UK hospitality operators and cross-referenced with payment terminal data from its own estate of merchant clients, shows that contactless tipping — where a separate tipping prompt appears on the card payment terminal at checkout, with the resulting payment ringfenced and processed through compliant distribution technology — has now reached 40% of restaurant and café sites and approximately 29% of pub and bar sites. The overall hospitality figure sits at around 36%.
What Compliant Tipping Infrastructure Looks Like
The legal requirement under the Tips Act is not specifically that operators adopt a particular technology — it is that tips and service charges are passed to workers fairly, transparently and without employer deduction, and that this process is documented. Contactless tipping technology achieves this by automating the collection, ringfencing and distribution of tip income, producing records that satisfy the documentation requirement and removing the manual handling that previously allowed — and in some cases facilitated — deductions.
The dominant platforms in the UK market are Zettle's tipping module, Dojo's tip management feature, and specialist tip management software including Tipjar and Gratuity Solutions, which integrate with POS systems and payroll platforms to automate the distribution of tips to individual staff members according to the operator's declared allocation policy.
For operators not yet using dedicated technology, compliant tip handling is possible through manual processes — maintaining separate records, processing tip payments through payroll, documenting the policy in writing — but the administrative burden is significant and the risk of inadvertent non-compliance higher. HMRC's guidance on the Act makes clear that ignorance of the requirements is not a defence.
The 60% Problem
The more pressing story in the Paymentsense data is not the 40% who have adopted compliant technology but the 60% who have not. The survey data does not disaggregate between operators who are handling tips compliantly through manual processes and those who are not yet compliant at all, but anecdotal feedback from hospitality advisers and employment lawyers suggests that non-compliance — through inertia rather than deliberate intent — remains widespread among smaller independent operators.
The practical risks are not theoretical. ACAS reported a 34% increase in tip-related employment tribunal enquiries in the twelve months following the Act's implementation. Several cases involving deduction of service charges from tipped workers have been settled, and at least two are believed to be proceeding to full employment tribunal hearings.
The low-cost path to compliance for small operators is straightforward: adopt a payment terminal with a built-in tipping module, write a one-page tipping policy, and ensure that tip payments appear in staff payslips with their distribution documented. The technology cost for most small operators is marginal — many payment terminal providers include tip management features in their standard product at no additional cost.
UKHospitality's free tipping policy template and compliance checklist, updated for the Act, is available at ukhospitality.org.uk.