Tips, Troncs and the Allocation of Tips Act: Getting Hospitality Pay Right

A guest settles a Sunday lunch bill of £180 and rounds it up with £20 on the card. Simple enough. But by the time that £20 reaches your team, how much of it is left, who decided the split, and could you show your working if a housekeeper asked?

If that made you pause, you are in good company. Tipping used to be something you sorted out with common sense and a bit of goodwill. Since 1 October 2024, it has been a legal question, with a written policy your staff can insist on seeing and a tribunal claim waiting at the end of it if you get it wrong.

The reassuring part is that all of this is manageable once somebody lays it out plainly. So here is what the Allocation of Tips Act hotels now work under actually requires, how a tronc behaves in practice, where hotels most often trip up, and what changes in October 2026.

Why tipping stopped being a matter of goodwill

The Allocation of Tips Act, which hotels are judged against, is formally the Employment (Allocation of Tips) Act 2023. It sits inside the Employment Rights Act 1996 and covers what the law calls qualifying tips: any tip, gratuity, or service charge you receive as the employer, or that you have control over or significant influence over.

That last phrase does the heavy lifting. A card tip landing in your merchant account is plainly yours to pass on. A £10 note pressed into a waiter’s hand, which he simply keeps, is not covered at all. But the moment you tell your team how cash tips get pooled or divided, you have taken control, and the Act applies.

Service charges work the same way, whether they are voluntary or added to every bill as standard. Acas puts it plainly in its guidance on what the law says about tips and service charges: if you receive the payment and you decide where it goes, it counts.

What the Allocation of Tips Act hotels operate under actually requires

The Allocation of Tips Act, which hotels must comply with, comes down to six duties. Not one of them is difficult on its own. The trouble is that most hotel businesses have never checked all six in a single sitting.

• Pass on the full amount. Every penny of qualifying tips reaches your workers.
• Make no deductions. Beyond the tax and National Insurance you are legally required to take, nothing comes off. Card processing fees, administration charges, and breakages are all off limits.
• Allocate fairly and transparently. Fair does not mean identical. It means clear, objective factors that you could explain out loud without wincing.
• Pay on time. Tips must reach workers by the end of the month after the month you received them. A tip left in March is paid by the end of April.
• Keep a written policy. Required wherever tips arrive on more than an occasional and exceptional basis, which is almost every hotel in the country.
• Keep records for three years. From the date the tips were paid, your team can ask to see them.

Agency workers are in scope too. Somebody working a wedding through an agency sits inside the policy and inside the share, exactly like your own staff.

Which payments count and which do not

This is where most of the confusion starts, so here is the short version.

What that looks like in a real month

Here is how the Allocation of Tips Act hotels operate under plays out across a single month.

Your hotel takes £4,000 in card tips and service charges during March. Your card provider takes 1.5 per cent, so £60 of that never really felt like yours. You cannot deduct it. The whole £4,000 goes to the team.

Twenty-five people are in the share. Your policy weights it by hours worked and level of responsibility, so a full-time chef de partie receives more than a casual banqueting server who worked two shifts. That is perfectly lawful, provided the weighting is written down and applied the same way every month.

The money must reach everybody by 30 April, and you keep the record until March 2029, because somebody may ask to see it.

How a tronc works, and why hotels use one

A tronc is simply an arrangement where somebody other than you decides how the tips are shared out. That person is the Troncmaster, and it might be a member of your team, your accountant, or an independent provider.

The attraction is National Insurance. Where a tronc is genuinely independent, tips paid through it can avoid both employer and employee National Insurance contributions, although income tax still applies through PAYE. Across a full year of service charge income, that is real money.

The catch is that the independence has to be real. HMRC treats the exemption as lost if you determine, directly or indirectly, what individual workers receive. You can set the broad framework. You cannot ring the troncmaster and ask them to look after the new sous chef.

So there is a balance to strike, because the Allocation of Tips Act hotels work under does not treat a tronc as a way of handing over responsibility. If you become aware that a troncmaster is allocating unfairly, you are expected to act on it. Monitoring for fairness without directing the outcome is the line to walk, and it pays to write down how you do it.

The written tipping policy your team can ask to see

Very few workplace policies are a legal requirement in their own right, which is what makes this one unusual. The Allocation of Tips Act makes it a statutory duty for hotels to follow a written tipping policy rather than good practice. It has to be available to every worker at that site, agency staff included, whether that is through the employee handbook, a shared drive, or the staff intranet.

At a minimum, it must set out whether you require or encourage guests to tip, and how you make sure those tips are shared fairly. A policy that does only the minimum tends to raise more questions than it answers, so we build them to sit alongside the rest of a client’s policies and procedures as one consistent set of rules rather than a document bolted on afterwards.

What a strong tipping policy covers

The Allocation of Tips Act: hotels are bound by the floor, not the standard. A policy that earns its keep covers all of this.

• Whether you invite tips, encourage them, or add a service charge as standard, and whether guests can decline it
• Which payments count as qualifying tips and which stay with the person who received them
• Who is in the share, covering front of house, kitchen, housekeeping, reception, maintenance, and casual or agency staff
• The factors behind the split, such as hours worked, role, responsibility, and length of service
• Whether a tronc is used, who the troncmaster is, and how they were appointed
• When tips are paid over and how they will appear on a payslip
• How somebody raises a concern, and the point at which your grievance procedure takes over
• The date it was last reviewed, and when it is due to be looked at again

Records, requests and the four-week clock

The Allocation of Tips Act requires hotels to also keep proper records, kept for three years from the date the tips were paid: the amount received, the amount paid to each worker, and anything handed to a tronc master to allocate. Acas sets out the details on tipping policies and records.

Your workers can ask to see those records once every three months. A request can cover one month or several consecutive months, going back three years, though only for the period they worked for you. Once it lands, you have four weeks to respond. That sounds generous until you are digging through a year of payroll exports in the middle of August.

Miss the policy or the records, and a worker has three months less one day to bring a tribunal claim, worth up to £5,000 for financial loss. Claims about the allocation itself carry a far longer window of twelve months, so a decision you made last summer is still live this one.

A successful claim rarely stops with the person who brought it, either. A tribunal can require you to put things right for everyone affected, whether or not they claimed themselves.

Where hotels most often get this wrong

Most breaches of the Allocation of Tips Act that hotels encounter are not deliberate. They are old habits that nobody has revisited since October 2024. These are the ones we see most.

• Taking card fees off the top. Understandable, since the fee is real and you are the one paying it. It is also unlawful.
• Using tips to reach the minimum wage. Tips have never counted towards the National Minimum Wage, and the penalties for getting pay wrong are steep.
• Leaving the kitchen out entirely. You can weight the split towards the front of house if you can explain why. Excluding the back of house without a reason is very hard to defend.
• Giving casual staff a smaller share by default. If your casual team skews young, that can amount to indirect age discrimination even though nobody intended it.
• Putting managers in the tronc without a rationale. Not automatically wrong, but it needs a clear justification you would be comfortable reading aloud.
• Forgetting the knock-on effects. Regular tronc payments can have implications for holiday pay, and the interaction is fiddly. Worth checking rather than assuming.
• Having no written policy at all. The most common of the lot, usually because the split has worked fine for years and nobody wrote it down.

Several of these overlap with ground we have covered before: paying the correct minimum wage, holiday pay and how to calculate it correctly, and for teams heavy on casual hours, the new rules on zero-hours contracts.

What changes in October 2026

The Allocation of Tips Act, which hotels have worked with since 2024, is about to be strengthened. The Employment Rights Act 2025 adds a consultation duty on top of everything already described, and the government has published a revised draft Code of Practice following a consultation that ran between February and April 2026.

Three things change. You will need to consult before producing your first written tipping policy, through a recognised trade union or elected representatives, or directly with the workers affected where none exist. You will need to review that policy at least every three years, consulting it each time. And after each consultation, you will need to make an anonymised summary of the feedback available to everyone at that site.

October 2026 is the expected date, although it has not been confirmed, and other dates under the Employment Rights Act 2025 have already moved more than once. Acas keeps a running summary of the changes coming under the Employment Rights Act 2025, which is the sensible place to check before you commit to a timetable.

The practical read is straightforward. If you are refreshing your policy anyway to meet the Allocation of Tips Act, hotels already sit under, bring your team into it now. You meet the coming requirement early and end up with a fairer policy, because the people working the shifts know exactly where the split feels rough.

A step-by-step way to get ready

1. Find your current tipping policy. If you cannot find one, that is your answer and your starting point.
2. Follow the money for one recent month. Total received, total paid out, and anything taken off in between.
3. Write down the factors behind your split and ask whether each is objective and defensible.
4. Check who is in and who is out, including kitchen, housekeeping, casual, and agency staff.
5. Test your records. Could you answer a written request within four weeks, going back three years?
6. Talk to your team about the split before you finalise anything, and note what they said.
7. Publish it where everyone can reach it, and put a review date in the diary for three years out.

One more thing worth checking while you are in there: your employment contracts and written statements. If they say nothing about tips, or say something that no longer matches how you actually operate, that gap tends to surface at the least convenient moment.

Peace of mind is the real point here

Getting the Allocation of Tips Act hotels operate under right is not a big job. An afternoon of honest checking, a policy written in plain English, and a system that keeps records without anybody having to remember to.

What it buys you is worth far more than the time. Your team stops wondering whether the split is fair because they can read exactly how it works. You stop worrying about a request landing on a Friday afternoon. And one more thing quietly loses its ability to become expensive.

If you would rather not work through it alone, that is what we are here for. We support hotel operators across the UK with HR for hotels, acting as an outsourced people department so that compliance simply happens in the background. Book a free consultation call, and we will tell you honestly whether your tipping arrangements would stand up, or get in touch and give us a ring on 01980 622167.