Businesses have been banned from withholding tips or service charges from their staff under new rules that have come into force.

All tips, whether in cash or by card, must be shared between workers by law in Britain, with millions of workers such as those working for cafes, pubs, restaurants, taxi companies and hairdressers most likely to benefit.

If an employer breaks the law and retains tips, a worker will be able to bring a claim to an employment tribunal.

Many have welcomed the change, but some warned it could burden businesses under pressure with an “additional cost”.

The law comes into force eight years after a government report first suggested the policy. It means tips must be passed to employees by the end of the following month from when they were received.

In 2021, the UK government said 80% of all tipping was taking place with a card, suggesting it had become easier for businesses to keep the money. The Department for Business and Trade has predicted the new law will mean a further £200m will be received by workers rather than their employers.

“The people working in hospitality are the lifeblood of our sector and these changes rightly ensure tips hard-earned through excellent service will end up entirely in their pockets,” said Katie Nicholls, chief executive of trade body UK Hospitality.

But she claimed the policy was “another example of costs being placed on a sector that can least afford it”.

“New rules naturally come with an administrative burden and businesses will see some additional cost as they work through them in practice,” Ms Nicholls said.

She said the industry would continue to urge the government to take action on business rates in the upcoming Budget.

The new policy comes after some companies, including casual dining restaurants, had faced criticism for holding back some or all of the tips meant for staff.

Nisha Katona, owner of Mowgli Street Foods, told the BBC the change was needed because “young people depend on the law to protect them” from employers who might avoid sharing tips with staff.

But she added while she supported the law, she believed it would hit some companies that were unprepared.

“There are going to be some casualties because of this law,” she said.

But Emma Webb from The Kitchen in Ilminster, Somerset, said the new rules would not change anything for her business.

“We have jars with everybody’s name on them and at the end of the day all the tips get shared out between all of the staff,” she said. “If customers give a tip through the card machine I get my staff to print off the receipt so I take the tips out of the till and put them in the jar.”

Sharon Graham, general secretary of Unite union, questioned how businesses might interpret the need to distribute tips “fairly”.

“Rogue employers will continue to try and deny workers fair tips despite the new legislation,” she claimed, adding it was “completely unacceptable” the law was not also introduced in Northern Ireland.

The Northern Ireland executive has been contacted for comment.

Labour’s Justin Madders, minister for employment rights, said the policy was “just the first step of many in protecting workers and placing them at the heart of our economy”.