Changes to the Employment (Allocation of Tips) Act

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Changes to the Employment (Allocation of Tips) Act
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Estelle Hardwick

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About Estelle Hardwick

Estelle is the Director of AMR, overseeing the Tonbridge, Tunbridge Wells and Chatham branches. She makes sure that AMR provides exceptional support to each and every client.

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Tips are an important part of the income accumulated by hotel, restaurant and bar staff. However, it’s not always been the case that the people for whom tips were intended have ended up getting the money; some unscrupulous employers keep back a large percentage, or even all, of the tips received. In the UK, hospitality workers must be paid the minimum wage by law, but the accumulation of tips can nevertheless make an essential difference to staff earnings.

Running a hospitality business is complex, and owners need to keep on top of legislation concerning their employees. Tipping rules have always been a minefield, with the tronc system often put in place which puts tips in a pooled fund that is then distributed between workers. However, this has not always been fairly utilised. Changes to the Employment (Allocation of Tips) Act should help to simplify rules for employers and incentivise employees, who know they will be correctly rewarded for a good level of service.

A glass jar labelled ‘tips’ on a wooden table

The new legislation aims to make tipping easier and more equal, and guarantee that all employers are following the same rules. The government states that the Act is intended to ‘ensure the fair and transparent allocation of all tips, gratuities and service charges . . . to improve fairness for workers by ensuring that the tips consumers leave in recognition of good service and hard work are going to the workers as intended.’ The Act was granted Royal Assent last year and was due to come into force on 1 July 2024, but this has been put back to 1 October 2024, giving businesses more time to organise compliance.

There are five main points which employers must undertake:

  • Pass on to their employees all service charges and tips without making any deductions, except for tax and national insurance.
  • Distribute tips fairly and transparently and make sure employees understand that tips are discretionary payments, not part of their contracted wages.
  • Maintain a hard copy of exactly how tips are allocated within the business and the distribution percentage and make this policy available to all employees.
  • Keep records of all tips received for a three-year period with a note of how they are allocated to each worker and make this policy available to all employees.
  • Ensure there is no delay in the distribution of tips.


The government advises that employers should undergo a consultation process with their workers in order to reach a consensus on a fair and transparent way to distribute tips. Tips may be allocated depending on role, level of experience and service, and whether the customer intended a reward for specific service.  If a tronc system is in place this can still be used, but it must be available for scrutiny by all employees.

The rules apply to tips paid in cash and collected by the employer, by card or via a mobile payment app or QR code. If, however, a worker receives a tip and keeps it without any involvement by the employer, it is out of the jurisdiction of the Act.

At AMR Bookkeeping, we work with hospitality businesses of all types and sizes, and we’re able to ensure our clients are fully up to date with legal requirements for bookkeeping. Often, clients are so busy running their businesses that keeping up with changes tends to drop down the to-do list. If your hospitality business needs help with ensuring your tipping distribution method complies with the Act, or any other aspect of bookkeeping or payroll, why not call our friendly and helpful team? Contact us on 01892 559480 or check out our website.

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