Tips and Service Charges Law UK 2024: What Hospitality Employers Must Do Now

The Employment (Allocation of Tips) Act 2023 brought the most significant change to tipping law in a generation. Before it came into force, employers had significant discretion over how tips and service charges were handled. From 1 October 2024, that discretion is gone. Every employer in hospitality, retail or any other sector where staff receive tips needs to understand what the law now requires and, if they have not already done so, act on it.

What the law requires from October 2024

Pass 100% of qualifying tips to workers. Qualifying tips, gratuities and service charges must be passed to workers in full. The Act covers tips received by the employer directly (for example via a service charge on the bill, or card tips processed through the business) and tips received by the worker but subject to the employer's control or influence. Voluntary tips paid directly by a customer to a worker and kept by that worker without employer involvement are not covered by the Act.

No deductions of any kind. Employers cannot deduct admin fees, card processing charges, management costs or any other amount before passing qualifying tips to workers. The amount that reaches the worker must equal the qualifying tip in full.

Fair allocation among workers. The Act requires tips to be allocated fairly. This does not mean equally. The allocation can reflect factors such as the worker's role, hours worked or contribution to the service. What it cannot do is systematically exclude eligible workers or prioritise managers unfairly.

Timing of payment. Tips must be paid to workers by the end of the month following the month in which the tips were received by the employer.

The written tipping policy you must hold

Every employer that receives tips must hold a written tipping policy. The policy must explain:

• →whether tips are received and how they are handled
• →how tips are allocated among workers
• →whether a tronc arrangement is in place and, if so, how it operates

The policy must be made available to workers on request. Workers who ask to see the policy must be given access. There is no requirement to issue it to every worker automatically, but if a worker asks and you cannot produce one, you are in breach.

The three-year record keeping requirement

From October 2024, employers must keep records of tips received and how they were allocated for at least three years. The records must be sufficient to demonstrate compliance with the Act. Workers can request information about how tips have been allocated to them specifically, and the employer must respond within four weeks.

If you cannot produce records showing how tips were allocated and paid, you cannot demonstrate compliance. In any tribunal claim, the absence of records will work against you.

Tronc arrangements

A tronc is a system where a designated person, the troncmaster, manages tip distribution independently of the employer. The troncmaster sets the allocation rules and pays out tips to workers.

Tronc arrangements remain lawful under the Act. Where a qualifying tronc is in place, the employer's obligation to pass 100% of tips to workers is treated as met by the tronc, provided the tronc meets the Act's requirements. The key conditions are that the troncmaster operates genuinely independently and that the employer does not direct how the troncmaster allocates tips.

If you use a tronc, review whether it meets the requirements. A tronc that the employer controls or directs is not a qualifying tronc under the Act.

Holiday pay and tips

Tips paid through a tronc and forming part of a worker's normal pay must be included in holiday pay calculations. The 52-week average reference period for irregular hours workers applies to their normal pay, which includes regular tronc payments. Employers who exclude tronc payments from holiday pay calculations are likely underpaying holiday.

What workers can claim at tribunal

Workers can bring employment tribunal claims under the Employment (Allocation of Tips) Act 2023 where an employer has:

• →withheld or deducted tips
• →failed to hold a written tipping policy
• →failed to keep adequate records
• →failed to allocate tips fairly
• →failed to respond to a worker's request for information about their allocation

The tribunal can award the underpaid tips for up to two years prior to the claim being brought. For a worker who has been receiving reduced tips due to unlawful deductions over that period, the award can be substantial. The tribunal can also make recommendations about how the employer's tipping arrangements should operate going forward.

The October 2026 consultation requirement

From October 2026, employers will be required to consult workers before setting or revising their tipping policy. This is a new obligation on top of the requirements already in force. The details of what consultation must involve were not fully published at the time of writing. Employers who have not yet put in place a written tipping policy, or who are planning to revise their policy before October 2026, should do so now and get their workers' input before the consultation requirement takes effect.

Related guides

• →Holiday pay for irregular hours workers
• →SSP changes April 2026: what employers must update
• →Zero hours contract rules UK 2026
• →Bereavement leave UK 2026: what changed and what to update