Tips and gratuities policy for hospitality

Since the tips Act came into force, an employer that receives tips more than occasionally must have a written policy on how they are allocated, must pass every tip it controls to its workers in full and fairly by the end of the following month, must keep records that workers can ask to see, and faces a tribunal claim if it does not. The policy has to say which tips the employer controls, how they are allocated and why that is fair under the code of practice, how any tronc operates, when payment is made, and how disputes are handled. I draft the policy for the employer as part of the handbook and core policies for a fixed fee of £995, delivered in five working days; the tax treatment of a tronc is confirmed by the employer's accountants.

Who this is for

Restaurants, bars, pubs, hotels, cafes, delivery businesses and any employer in England and Wales whose workers receive tips, gratuities or service charges from customers.

What matters in a tips policy

What the tips law requires and when a written policy is mandatory

The Employment (Allocation of Tips) Act 2023 inserted provisions into the Employment Rights Act 1996 requiring employers to pass on all qualifying tips, gratuities and service charges to workers without deductions (other than tax), to allocate them fairly having regard to the statutory code of practice on fair and transparent distribution of tips, to have a written tips policy available to workers where tips are paid at the place of business more than occasionally, to keep records for three years, and to give workers the right to request those records; the policy is the document the Act requires, and an employer that receives tips every week and has no written policy is already in breach.

Which tips the employer controls and which it does not

The Act applies to employer-received tips (card tips, service charges added to the bill, tips paid through the employer's systems) and to worker-received tips the employer controls or significantly influences (cash tips the employer requires to be pooled), and does not apply to cash tips a customer hands to a worker that the employer leaves alone; the policy should state which tips the business receives or controls, which it does not, and that cash tips given directly to a worker are the worker's unless the policy brings them into a pool, because the first question in any dispute is whether the tip was the employer's to allocate.

Fair allocation and the factors the code of practice allows

The code of practice allows an employer to allocate tips by reference to factors that are fair and consistently applied (the type of role, hours worked, performance, seniority, length of service, customer intention), prohibits allocation by reference to protected characteristics or to a worker's status as agency staff, and expects the employer to consult workers on the method and to apply it transparently; the policy should set the allocation method (an equal split, points by role, a percentage to kitchen staff, a tronc committee's decisions) and the reasons it is fair, and should say how the method is reviewed, because fairness is judged against the code and not against custom.

Troncs, independence and the tax treatment

Where the employer appoints an independent tronc operator (a member of staff or a third party who decides the allocation without the employer's influence), the employer's duty under the Act is to pass the tips to the tronc and to ensure the arrangement is fair overall, and a properly independent tronc means that national insurance is not due on the tips under the rules HMRC applies, which is why most hospitality businesses use one; the policy should describe the tronc (the operator, the rules, the committee where there is one), state that the employer does not influence the allocation, and record that the accountants have confirmed the tax treatment, because a tronc the employer controls is not a tronc.

Timing, records and the worker's right to see them

The policy should state that tips are paid by the end of the month following the month in which the customer paid them, through payroll or the tronc, with the amounts shown separately, that the employer keeps a record of all qualifying tips received and the amounts allocated to each worker for three years, and that a worker may request the records relating to their place of work (the total and their own share, without other workers' identities) once in any three months, with the employer responding within four weeks; late payment and missing records are the breaches that produce tribunal claims, and the policy should make the timetable a system.

Agency workers, disputes and enforcement

Agency workers at the place of business are entitled to the same fair treatment under the Act, with the employer paying their share to the agency to pass on or directly as the Act provides, and the policy should say how; a worker may complain to an employment tribunal within twelve months of a failure to allocate or pay, with the tribunal able to order payment to all affected workers and compensation of up to five thousand pounds for financial loss, and the policy should provide an internal route for questions and disputes first (the tronc committee, the manager, the grievance procedure) so that an allocation a worker thinks unfair is discussed before it is litigated.

What it costs

Staff handbook and core policies, £995. Five working days.

Employment contract, £595. One template you can reuse for a grade of staff. Five working days.

Buying online forms the engagement on payment. The scope is what the employment contracts and handbooks page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A bespoke contract drafted for how you employ people
• Restrictive covenants drafted at a scope a court will uphold
• Confidentiality and intellectual property provisions that put ownership where it belongs
• The statutory particulars, so the document does the job section 1 of the Employment Rights Act 1996 requires it to do
• Flexibility clauses where you genuinely need them, drafted to survive challenge
• Core policies: disciplinary, grievance, sickness absence, equal opportunities, data protection and, increasingly, AI use
• One round of amendments

What is not included

• Acting for employees
• Employment tribunal representation
• Payroll, pensions auto-enrolment and tax
• Immigration and sponsor licence work
• Day to day HR handling, disciplinaries, grievances and redundancy processes

Questions I am often asked

We let staff keep the cash tips customers give them. Does the Act apply to those?

Not where the employer leaves them alone. The Act applies to tips the employer receives or controls, including card tips and service charges. The policy says which is which.

Can we give the kitchen a share of the tips?

The policy can allocate a share to the kitchen under a fair method, with role as one of the factors the code allows. Many policies allocate a percentage to kitchen staff.

Does using a tronc save national insurance?

Where the tronc is independent of the employer, HMRC's rules mean national insurance is not due on the tips. The policy describes the tronc and the accountants confirm the treatment.

Related guidance and services

• Employment contracts and handbooks, £995, the service this page describes
• Consultancy and contractor agreements, £595
• Staff handbook for a hospitality business
• Employment contract for restaurant and hospitality staff

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.