The bill arrives. There’s a service charge. The customer pays it, assuming the people who looked after them will receive the money. Your staff would quite like to know whether that assumption is correct.
For hospitality employers, tipping law comes down to three questions: who gets the money, how do you decide, and can you explain the answer? If the explanation involves several managers and a spreadsheet nobody quite understands, keep reading.
The business doesn’t get a cut
Employers must pass qualifying tips to workers without deductions, except those authorised by law. The Employment (Allocation of Tips) Act 2023 has applied in England, Scotland and Wales since 1 October 2024. It covers tips and service charges received by the employer, alongside certain tips whose distribution the employer controls or significantly influences. Card-processing fees? A business expense. Administration? Also, a business expense. Neither can be taken from the tip pot. The card machine may be expensive. It still doesn’t get a share of the tips.
Lawful tax deductions can apply. And employers must allocate qualifying tips and make the required payments by the end of the calendar month following the month the customer paid. A tip paid in November 2026 must therefore be dealt with by 31 December 2026.
Fair doesn’t always mean equal
Workers can receive different shares, provided the allocation is fair and the reasons stand up to scrutiny. A head waiter and someone working their first shift do not necessarily have to receive identical amounts. Hours worked, responsibilities, roles and performance can all be relevant. But management needs a coherent explanation. Personal favourites are a poor allocation system. Consider the kitchen team and agency workers too. The customer’s experience depends on more than the person carrying the plates, and agency status alone should not leave someone out. Allocation must also avoid unlawful discrimination.
My view: if you would struggle to explain the split to the people receiving it, revisit the split.
Your policy needs to match payday
Businesses receiving qualifying tips regularly must have an accessible written tipping policy and keep the required records for three years. The policy should explain how tips are handled and shared. Workers, including agency workers, need access to it. Workers can also request tipping information, with a qualifying written request requiring a response within four weeks. A beautifully drafted policy achieves very little if Friday’s service charge takes a different route through payroll.
Check the practice against the paperwork.
Three quick tipping FAQs
Can staff keep cash tips?
Cash tips kept by workers without employer involvement or control are generally outside the tipping legislation.
Once management collects the cash or controls its distribution, the position changes. Cash is not a shortcut around the law.
Does a tronc sort everything out?
An independent tronc can help, but employers must act if they become aware that the arrangement operates unfairly. Outsourcing the allocation does not give you permission to ignore a problem.
Can tips top up minimum wage pay?
No. Tips cannot count towards an employer’s National Minimum Wage obligations. A generous table cannot make up for an underpaid shift.
The check I would make now
Trace one month’s tips from the customer’s payment to the worker’s pocket. Check the deductions, the allocation, the payment date and the explanation given to staff. That exercise will tell you far more than asking whether someone updated the handbook. Further tipping consultation requirements are scheduled for 1 January 2027, so put your policy review on the agenda now. Your team should be able to understand where the money went without commissioning an investigation.
By Ola McGhee. Updated 4 November 2026. General information on employment law in Great Britain. Does not constitute legal advice.
