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The UK's Employment (Allocation of Tips) Act and its accompanying Code of Practice change how tips, gratuities and service charges are handled by employers. Hospitality SMEs are the most affected — and the most exposed if they get it wrong.

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Explore Annaizu’s shift planning and availability for a more efficient and compliant way to manage this area.

For employers looking to streamline operations, Annaizu’s shift planning and availability can support a more efficient and compliant workflow.

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This guide breaks down what the rules actually require, how tronc systems fit in, and what you need to write into your tipping policy. It is not legal advice, but it is a practical map of the things you need to be confident about.

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What the law actually requires

At its core, the legislation requires that all qualifying tips, gratuities and service charges paid by customers are passed on to workers in full, allocated fairly, and paid by the end of the month following the month in which they were received. Employers cannot deduct administration costs from tips and cannot keep any portion for themselves.

Three principles underpin the rules:

• Full pass-through. 100% of qualifying tips go to workers.
• Fair allocation. Distribution must be fair and transparent, not arbitrary.
• Timeliness. Tips received in a given month must be paid out by the end of the next month.

What counts as a " qualifying tip"

Cash tips kept by an individual worker and not handled by the employer are largely outside scope. The rules apply primarily to tips that the employer controls — most card tips, service charges added to the bill, and any tip that goes through the till or a tronc.

If your customers tip mainly by card or via a service charge, almost all of your tips are in scope.

What " fair" allocation looks like

The Code of Practice does not prescribe a single formula. Instead, it sets out principles: allocate by reference to clear, justifiable factors and apply them consistently. Common factors include hours worked, role, level of responsibility and length of service. What matters is that the policy is explained, applied evenly and reviewed.

You can choose to pool tips across the venue, by team, or by shift — but whichever you choose, the method must be written down and shared with workers.

What is a tronc, and do you need one?

A tronc is an arrangement under which a person other than the employer (the " troncmaster") is responsible for distributing tips. Properly run, a tronc allows tips to be paid out without National Insurance Contributions on the employer side, provided the troncmaster operates independently.

You do not need a tronc to comply with the new rules — but many hospitality businesses use one to manage allocation cleanly. If you run a tronc, the troncmaster must allocate fairly under the same principles as the Act.

Your written tipping policy

Every business in scope is expected to have a written tipping policy, available to staff. A workable policy covers:

• Which tips are pooled and which are kept by the worker who received them.
• How tips are allocated (factors, weighting, examples).
• How and when tips are paid (alongside payroll, on a separate cycle, etc.).
• How disputes are raised and resolved.
• Whether a tronc operates and who the troncmaster is.

Records and transparency

The rules require employers to keep records of tips received and allocated for at least three years, and workers have the right to request information about their tips going back up to three years. In practice this means a clean audit trail per shift, per worker — not a notebook behind the bar.

This is where digital tools save real time. Linking your time and attendance data with your tip allocation system means you can prove, for any worker, the hours they worked and the tips they were paid in any given period.

Pay equality and tip allocation

Tips must not be allocated in a way that breaches equality law — for example, allocating less to staff on family leave or to part-time workers without justification. The same fairness rules that govern pay generally apply here too.

What employers should do now

If you have not already done it, work through this checklist:

• Audit how tips currently flow into and out of the business.
• Decide whether you will run a tronc and, if so, appoint a troncmaster.
• Write a clear tipping policy and share it with staff.
• Set up a record-keeping system that ties tips to hours worked.
• Make sure tips are paid out by the end of the month following receipt.
• Train managers on how to handle questions and disputes.

Annaizu's rota and workforce management software and HR software give you the underlying records — hours worked, roles, length of service — that any fair tip allocation depends on.

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Conclusion

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The new tipping rules are not difficult to comply with, but they do require a written policy, a clean record trail and a fair, explained allocation method. Treat it as a one-off project, get it right, and the day-to-day operation becomes routine.

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