Tipping laws in the UK - what employers need to know

Since October 2024, the Employment (Allocation of Tips) Act has required employers to make sure that workers receive the full tip from a customer. It should benefit more than two million UK workers across the hospitality sector.

The Act places a legal obligation on businesses to distribute all discretionary tips, sets out a timeframe in which to distribute them, and a requirement to implement a business policy ensuring fair and transparent distribution of tips.

What counts as a tip?

The legislation applies to ‘employer-received’ tips, and limited ‘worker-received’ tips, if the employer exercises significant control. As well as payments, tips also include vouchers, stamps, tokens, casino chips or similar with a monetary value or capable of being exchanged for money, goods or services. Direct ‘worker-received’ tips are not within the legislation and tax due is the responsibility of the employee.

How should tips be paid

All tips, service charges and gratuities must be paid to workers and cannot be subject to deductions, including administrative fees. Tips must be paid to workers by the end of the month following the month they were paid by the customer. Tip distribution must be fair and transparent with due regard to a Code of Practice (COP) - this can include a tronc arrangement.

Code of practice for tips

Businesses must have a written tips policy that details whether the employer requires or encourages customers to pay tips, and how the employer ensures that all qualifying tips, gratuities and service charges are paid and distributed fairly. Employers must retain a tipping record of the total tips received and details of their allocation to workers for up to three years.

This includes confirming that tips that a customer pays direct to individual workers by cash or via an app, with no oversight by the employer, are not ‘employer-received’ and are therefore outside the scope of the legislation.

Read the code of practice in full here

What are workers' rights

Agency workers are entitled to receive tips in the same way as employees, and the agency is required to distribute the tips once allocated by the employer. All workers have the right to request details of the total amount of tips received and the amount paid to them. Employees and agency workers can raise a tip dispute through an employment tribunal and have 12 months to make a claim.

Tronc arrangements

Businesses can continue to use a tronc arrangement to manage the allocation and distribution of tips. This is overseen by a troncmaster, who is typically a general manager. They independently oversee the allocation of tips and administer the arrangement. Neither employers nor senior management can be the troncmaster, but employers can oversee the appointing or removal of a troncmaster. The advantage of a robust tronc scheme is that the tips are exempt from Class 1 employers and employees NIC.

How we can help

Even if your previous internal tronc arrangement has continued, it is important to review the way it operates to make sure that it meets your obligations.

We can help you understand and implement the legislation and the Code of Practice so you can update your practices and policies and remain compliant. Our team can support you to:

  • Review longstanding tips and tronc documents, processes and policies and recommend any changes required to adhere to the 2024 legislation
  • Provide training to ensure your troncmaster, tronc recipients and the businesses key stakeholders are aware of the rules
  • Implement a tips policy alongside your troncmaster policy
  • Prepare tronc participant communications.

For help and advice please contact Jacqui Roberts or John Chaplin.