The law on tips in the UK requires employers to pass on all tips, gratuities and service charges to workers without deductions. Under the Employment (Allocation of Tips) Act 2023 workers will keep 100% of their tips and service charges. It is illegal for businesses to withhold tips or make deductions except for statutory tax and national insurance contributions.. The law applies to cash tips, card tips, digital tips and tips received as gifts and vouchers. These tips are qualifying tips where the employer exercises control or significant influence over their collection or distribution.
Tronc systems can still be used if 100% of qualifying tips are passed to the tronc and distributed fairly by an independent troncmaster. The Code of Practice ensures fairness based on role type, hours, performance, and seniority.
For restaurants, compliance involves transparent distribution policies and proper recordkeeping. Employees benefit from higher earnings, timely payments, and legal protection through employment tribunals, which can award up to £5,000 for breaches.
The law on tips in the UK requires employers to pass on all tips, gratuities and service charges to workers without deductions other than statutory tax. Under the Employment (Allocation of Tips) Act 2023 workers will keep 100% of their tips, gratuities and service charges. It is illegal for businesses to withhold tips and make deductions other than for statutory tax such as income tax and national insurance contributions. Under the act employers are required to pay all tips and service charges to workers no later than the end of the following month in which the tips and service charges were received. The law requires employers to create a written tipping policy outlining how tips are allocated amongst staff members. This policy must be available to all staff.
The law improves the fairness and transparency of tipping practices in the UK. All workers who work in establishments where tips are frequently received are entitled to a fair allocation of tips. The share of these tips and service charges must be made in a fair and transparent way in accordance with the Code of Practice on fair and transparent distribution of tips. The Code of Practice accompanies the law promoting fairness based on factors such as type of role, hours worked, individual and team performances, seniority and length of time served. Workers have the legal right to bring claims to employment tribunals when employers fail to comply with the act. Employment tribunals can order employers to pay compensation to affected workers and ensure compliance with the legislation.
This legislation applies to all tips and service charges where employers exercise significant control over collection or distribution. This includes all cash tips, card tips, digital tips and gifts & vouchers received under employer control. Tips and service charges received directly by staff not under employer control are out of scope of the Act. Businesses are required to maintain records for 3 years under the act. These records include the total amount of qualifying tips paid at or attributable to the business, the amount allocated to workers, and the amount allocated via independent tronc operators.
The Employment (Allocation of Tips) Act 2023 came into force on 1st October 2024. The Act received Royal Assent on 2nd May 2023. Its main provisions and the accompanying statutory Code of Practice for fair tip distribution became effective on this later date. The legislation was initially planned to come into force on 1st July 2024 but was subsequently delayed to 1st October 2024.
No, your employer cannot keep your tips in the UK. The Employment (Allocation of Tips) Act 2023 prohibits employers from retaining any portion of tips, gratuities, or service charges that customers pay. Employers must pass on 100% of qualifying tips to workers without deductions, except for statutory tax and National Insurance Contributions required by HMRC.
The law applies to all tips where employers exercise control or significant influence over their collection or distribution. This includes card payments, service charges added to bills, and any tips that go through the employer’s systems. Cash tips paid directly to workers remain the property of those workers. Employers who fail to comply with these requirements face employment tribunal claims and potential compensation orders of up to £5,000 per affected worker.
The law applies to cash tips, card tips, digital tips and tips received as gifts and vouchers. These tips are qualifying tips where the employer exercises control or significant influence over their collection or distribution.
Cash tips refers to physical money given to a service worker by a customer in addition to payment for a service, typically as a reward for good service. The law applies to cash tips if the employer collects them for distribution amongst staff or instructs workers on how to share them. The law does not apply to cash tips that workers receive and keep directly without any employer involvement or control.
Card tips refer to tips added to credit or debit card payments processed through business systems such as a payment terminal or app. The law covers all cashless tips received by employers via credit or debit card payments, including service charges added to bills. These tips are under employer control as they are processed through the business payment system before reaching workers.
Digital tips refer to tips paid through apps, QR codes, or online platforms. The law applies to digital tips processed through employer-managed systems or apps where the business controls distribution. The law does not apply to tips given directly to workers via third-party apps where employers have no control or involvement in the transaction.
Gifts and vouchers are non-cash items with monetary value given by customers to workers in addition to payment for a service, typically as a reward for good service. The law covers gifts and vouchers under employer control that have monetary value and can be divided or exchanged for money, goods, or services. Non-monetary gifts without exchangeable value that cannot be fairly distributed amongst workers fall outside the scope of the legislation.
The main impact on restaurants is the legal requirement to distribute 100% of all tips, gratuities, and service charges to workers without any deductions except statutory tax and National Insurance contributions. The Employment (Allocation of Tips) Act 2023 makes it illegal for restaurants to withhold customer tips under employer control for business purposes or administrative costs.
Restaurants require to pay tips no later than the end of the month following receipt from customers. Restaurants are required to create fair and transparent tip policies available to all staff. This tip policy must clearly outline distribution methods amongst staff members. Restaurants must allocate tips fairly in accordance with the Code of Practice taking into account factors such as worker roles, hours worked, individual and team performances, seniority and length of time served. Restaurants must record all tip transactions and their allocation to workers for 3 years. For restaurants paying all tips and service charges into a tronc system must still comply with the tip law.
Restaurants can benefit from modern payment solutions such as card machines with integrated cashless tipping software like URocked that process tips and bill payments together whilst maintaining compliance with the legislation. These systems help automate tip tracking, ensure accurate distribution, and maintain the required records electronically. Such technology solutions reduce administrative burden whilst ensuring restaurants meet their legal obligations for fair and transparent tip distribution.
The main benefits the tip law provides to employees include:
A tronc refers to an organised pay arrangement where tips and service charges are pooled together and distributed amongst staff members by an independent person called a troncmaster. The law on tronc tips allows employers to use a tronc to fairly distribute tips, gratuities, and service charges among workers. The law on the use of troncs is outlined in the Employment (Allocation of Tips) Act 2023. Employers are compliant with the law provided they pass on 100% of qualifying tips to a tronc in accordance with the code of practice. The tips passed onto a tronc are tips received by the employer or tips under significant influence by the employer. The employer must pass on qualifying tips to the tronc without making any deductions except for statutory tax.
Under the law, the employer is responsible for ensuring workers receive tips no later than the end of the following month even with a tronc. Employers using tronc arrangements must establish a written tipping policy that clearly outlines how tips are collected, pooled, and distributed to workers via a tronc. This policy must be accessible to all employees and specify the roles of the troncmaster and the criteria used for tip allocation.
Employers are required to keep detailed records for 3 years including the total amount of qualifying tips paid at or attributable to the business, the amount allocated to workers, and the amount allocated via independent tronc operators.
For troncs that are not distributing tips fairly to workers in a timely manner, employers must take steps to resolve these issues. Employers have three main options to resolve unfair distribution of tips using a tronc including; raise concerns with the tronc, change the troncmaster and end the tronc arrangement.
The law applies to service charges by treating them as “qualifying tips” under the Employment (Allocation of Tips) Act 2023. Employers must pass on 100% of service charges to workers without deductions. Both discretionary and mandatory service charges must be passed on to eligible staff. Deductions for statutory tax, national insurance contributions and VAT for mandatory service charges are the only deductions permitted under the act. Service charges are payments where the employer has control or significant influence over as they are added as a percentage to the bill and typically captured alongside the payment of the bill.
Service charges are to be distributed fairly in accordance with the Code of Practice. Service charges are typically pooled for distribution for all eligible staff. Based on the Code of Practice service charges are to be distributed fairly based on the type of role, hours worked, individual and team performances, seniority and length of time served. Under the law, service charges are to be paid to workers no later than the end of the following month in which they were received by the business.
The Act outlines that within the tip policy the treatment of service charges must be covered. The policy should explain how service charges are collected and distributed to staff. Businesses are required to maintain records of service charges paid and allocated for 3 years under the act. These records include the total amount of service charges paid at or attributable to the business, the amount allocated to workers, and the amount allocated via independent tronc operators.
No, a service charge is not the same as a tip. A service charge is a fee added to the bill of a business. The main difference between a service charge and a tip is that a tip is a voluntary payment made at the customer’s discretion. Service charges are mandatory or discretionary. A mandatory service charge is a fee added to the bill where there is an obligation to pay. A discretionary service charge is a fee added to the bill that the customer can choose to pay or not to pay.
The main confusion comes from how service charges are treated under the law. Under the Employment (Allocation of Tips) Act 2023 a service charge is treated the same as tips. Service charges and tips being treated the same under the law has caused some confusion. The Act defines service charges as “qualifying tips” because employers have control or significant influence over these payments. Service charges meet the legal definition of tips regardless of whether they are discretionary or mandatory additions to customer bills.
All restaurant workers including full-time, part-time, temporary staff and agency workers are entitled to service charges at restaurants. All eligible restaurant workers are entitled to a fair share of discretionary and mandatory service charges. Under the law, all workers who undertake work or services personally for another party under a contract, either of employment or another agreement are eligible workers. This includes not only traditional employees but also workers with different kinds of agreements, such as part-time, casual, or agency workers.
Service charge in restaurants must be distributed fairly to all restaurant workers in accordance with the Code of Practice. Service charges are fairly distributed based on factors such as type of role, hours worked, individual and team performances, seniority and length of time served.
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