The tip-off on service charges
“New legal updates mean your team will have a bigger say in how you handle tips. Here’s how to prepare for the changes”
What the ‘Tipping Act’ did
The Employment (Allocation of Tips) Act 2023, known as the Tipping Act, guaranteed that service charges would be passed on fairly to employees, minus the usual tax and National Insurance that apply. These rules came into effect in October 2024.
Venues like pubs and restaurants had to set out a policy or code of practice covering how tips would be shared between workers. This included establishing a system which recorded the collection and handing out of both cash and digital tips.
Tronc systems can be used to collect and guarantee the fair sharing of service charges within teams. A Troncmaster (either a worker, accountant or separate company) is in charge of running this system but employers are responsible for following the law.
What changes are coming in October 2026?
Changes set out in the Employment Rights Act 2025 add to those in the Tipping Act. So from October 2026:
Employers will need to consult workers before they make or change their tipping policy. This can be done through a trade union, elected worker reps or directly with teams. After a consultation, employers must give an anonymised summary of any feedback
Tipping policies must be reviewed every three years. Workers must also be consulted in this process. This is designed to ensure any policy or practice meets minimum standards of fairness and transparency
Employers who don’t run consultations will face stronger enforcement. This may include a complaint to an employment tribunal or the Fair Work Agency. Employers found not to be complying with the rules may be forced to pay compensation up to £5,000.
“63% of hospitality workers say they now feel fairly paid ”
What do employers need to do?
Establish a tips system: whether it’s Tronc or not,
having a platform that can help you manage your tips will save a lot of
headaches and keep management transparent and fair.
Create a ‘tips council’: get a group of colleagues together who
can manage any consultations, feedback or changes to the tipping policy.
Essentially, they act as in-house reps for your team.
Set the policies and processes: with guidance from the tips council,
build your policy and processes. Then communicate them clearly to your
team so they know exactly where they stand.
