Guides / The Tips Act checklist

Tips and the law: a checklist for hospitality businesses

Since October 2024, the Employment (Allocation of Tips) Act 2023 sets legal duties for every business whose staff receive tips. Work through the questions below. Any “no” is a gap worth closing before a staff complaint or tribunal claim forces the issue: tribunals can already award up to £5,000 per worker for breaches.

The basics

• Written tips policy. Do you have a written policy saying how tips are collected, who is eligible, and how they are shared? Is it available to all staff?
• Passed on in full. Are 100% of tips passed to staff, with no deductions for admin, breakages, till shortages or card fees?
• Paid promptly. Are tips allocated fairly and paid no later than the end of the month after the month they were received?
• Records kept. Could you show three years of records of how every tip was allocated? Could you answer a staff member’s written request for their record within four weeks?

Common trouble spots

• Mandatory service charges. If you add a compulsory service charge, is it kept out of the tips pool? A mandatory charge is business revenue (subject to VAT and NI), not a tip.
• Agency and zero-hours staff. Does your policy cover everyone who earns tips, including agency workers and casual staff?
• Fairness factors. Can you explain the basis of the split (hours worked, role, seniority) if a staff member asks?

If you run a tronc (or want the NI saving)

Tips paid through a compliant tronc are free of employer and employee National Insurance. For that to hold up with HMRC:

• Independent troncmaster. Someone other than the owner decides the allocation, and the owner does not overrule it.
• Separate PAYE scheme. The tronc has its own PAYE scheme registered in the troncmaster’s name, not the venue’s.
• Voluntary tips only. Only voluntary tips and voluntary service charges flow through the tronc.

The reasoning behind each of these is in the tronc guide, and whether you need a troncmaster at all is covered in its own guide.

Coming in October 2026

• Consultation. Are you ready to consult staff (or their representatives) before producing a new tips policy, and as part of every review?
• Three-year reviews. Do you know when your first policy was made available? The statutory review clock runs from that date, even where it predates the new rules.
• Anonymised summary. Could you publish an anonymised summary of consultation views to all staff?