From 1st October 2024, the Employment (Allocation of Tips) Act 2023 becomes law, and frankly, it’s about time. With over 2 million hospitality workers set to benefit, you’re looking at more than just regulatory box-ticking. This represents a fundamental shift in how we value the people who make our service industries thrive.
What You’re Actually Dealing With
The legislation cuts straight to the point: all discretionary tips, service charges, and gratuities must go directly to the workers who earned them. No skimming, no “administrative fees,” no creative accounting. Whether tips come via cash, card, vouchers or even tokens, they belong to your team. And yes, this covers tips paid to you as the employer and those received directly by staff.
Getting Your House in Order
Your compliance checklist isn’t complicated, but it’s non-negotiable:
- Distribute everything by the end of the month following receipt.
- No deductions whatsoever administrative fees are now off the table.
- Create a written tipping policy that’s clear and accessible to all staff.
- Keep meticulous records for at least three years, you’ll need them.
Your policy needs to specify whether you encourage tipping and exactly how tips get shared. Saying one thing and doing another won’t wash anymore.
Workers Know Their Rights
Everyone gets a fair share, including agency workers. Your team can request tip statements and, if they suspect foul play, take you to an employment tribunal within 12 months. The transparency you might have considered optional? It’s now legally enforceable.
The Code of Practice: Your Roadmap
Published in April 2024 after public consultation, the Code of Practice offers practical guidance that’s actually useful. Key clarification: tips paid directly to staff through apps remain outside your control. For agency workers, you must pass tips on promptly once they’re allocated to avoid complications.
Tronc Schemes: Worth Considering
Many savvy operators already use Tronc arrangements with an independent Tronc Master overseeing tip allocation. This isn’t just about fairness (though it delivers that) you’ll also benefit from NIC exemptions for both you and your employees. You can appoint or remove the Tronc Master, but you can’t be one yourself. That’s the whole point.
Service Charges: The Final Countdown
Until October, discretionary service charges legally belong to you until passed on. You can process these through payroll or a Tronc system, with deductions only for genuine costs like card processing fees. After October? The game changes completely in favour of your workers.
The Numbers That Matter
This legislation will redirect an additional £200 million annually to workers’ pockets. That’s not just policy wonkery it’s a clear statement about what we value as an industry. The people serving customers deserve every penny customers choose to give them.
Consequences Are Real
Non-compliance isn’t a slap on the wrist. Employment tribunals can order compensation up to £5,000, and you won’t get overpaid tips back. Robust systems and genuine respect for your team aren’t just nice to have they’re essential.
What You Need to Do Now
With the deadline approaching fast, smart businesses are already:
- Reviewing existing policies and employment contracts.
- Implementing or updating Tronc arrangements.
- Training staff on their new rights comprehensively.
- Communicating changes clearly and regularly.
Consider engaging an independent Tronc operator. It simplifies implementation and demonstrates genuine commitment to fairness.
Part of Something Bigger
This change sits alongside other significant worker rights improvements: substantial minimum wage increases, enhanced protections for parents and carers, and expanded flexible working options. The message is clear businesses that prioritise their people will be the ones that thrive.
The Bigger Picture
In hospitality, tips represent more than money they’re recognition, appreciation and trust made tangible. This legislation ensures those sentiments reach their intended recipients. As leaders, you have a genuine opportunity to demonstrate fairness whilst building operational excellence. The question isn’t whether you’ll comply it’s how well you’ll embrace the change.
Further Reading:
- UK Government Draft Code of Practice on Tips Distribution
- Department for Business & Trade: Legislation Overview
