Employment (Allocation of Tips) Act 2024: A 2026 compliance guide for UK restaurants

On 1 October 2024, the Employment (Allocation of Tips) Act came into force, meaning that UK employers must now pass 100% of tips and service charges to workers, allocate them fairly and transparently, and keep records for three years. 

The Tips Act 2024, UK, ended a long-standing grey area where some restaurants retained a portion of tips for "admin", "breakage", or uniform costs. That's now unambiguously illegal.

Most UK restaurant operators know the Act exists and have measures in place to distribute tips fairly. But there are some that still haven’t worked through their current setup to make sure they’re compliant. 

In this article walk through what the Act requires*, what the Code of Practice says about "fair" allocation, and provide you with a 10-point compliance checklist you can apply straightaway.

*This article is general operational guidance, not legal advice. For your specific situation, work through the Code of Practice with your legal or HR team.

What the Employment Allocation of Tips Act 2024 actually requires: The UK hospitality tips law explained

The Employment (Allocation of Tips) Act has four core requirements, all of which apply to employers where workers receive tips, gratuities, or service charges. This covers essentially every restaurant, bar, café, hotel, and pub in the UK.

Here are the four core requirements: 

1. 100% of tips must go to workers. Employers can’t deduct any amount from tips for their own purposes. That includes admin fees, uniform costs, breakage cover, till shortages, or any other operational cost. The only permitted deductions are statutory (income tax and, in some cases, National Insurance).

2. Allocation must be fair and transparent. How you distribute tips among workers must follow a clear, written policy. The policy must reflect factors like hours worked, role, and performance, not arbitrary management discretion.

3. A written tips policy is required. Every employer must have a written policy explaining how tips are collected, allocated, and paid. Workers must be able to access it at any time. 

4. Records must be kept for three years. Employers must maintain records of all tips received and how they were allocated for at least three years. Workers have a right to request access to records covering their own allocation.

The Employment (Allocation of Tips) Act 2024 compliance checklist 

Use this restaurant tips compliance checklist to quickly identify gaps in your restaurant compliance processes, stay on top of key requirements, and build safer, more consistent operations across every location.

1. A written policy explaining how tips are collected and allocated amongst staff.. Outline how you’ll distribute tips between staff members. Will it be split by hours worked, role, tenure, performance? If your policy relies solely on “management discretion”, rewrite it. Use this tipping policy template from HMRC as a guide. 

2. Written tips policy is accessible to staff. Not in an owner's head or on a laminated sheet in the manager's office. A written policy that any staff member can request and receive at any time. Use digital tools (like a restaurant operating system) to store policies in a central, easily accessible location. 

3. If you use a tronc scheme, the troncmaster is designated and independent. The troncmaster must be independent of ownership decisions about pay, meaning they can’t be the owner or a director of the business. 

4. Tips are paid within one month of receipt. The law sets a maximum payment window of one month from when tips are received. While weekly or fortnightly payments are common for tronc schemes, monthly is the latest tips should be paid. Make sure your payroll process is set up to avoid unnecessary delays.

5. Records of tips received and allocated are kept for three years. Keep clear records showing how much you made in tips, how it was distributed, and who received what. These records should be broken down by site, pay period, and worker. Whether you store them digitally or physically, they must be accurate, secure, and easy to retrieve if needed.

6. A process for handling access requests. Employees have a legal right to understand how their tips were calculated and allocated. Create a clear process for handling these requests, including who they should contact and how quickly records will be provided.

7. Service charges are handled correctly. Whether a service charge is mandatory or discretionary, any tips and service charges covered by the Act must be passed on to workers in full. Employers cannot keep any portion or use service charges to cover business costs.

8. Deductions from tips are limited. Employers can’t make deductions from tips to cover admin costs, card processing fees, breakages, cash shortages, or other business expenses. The only permitted deductions are specific tax and National Insurance requirements (where applicable - find out more on the HMRC website).

9. Agency workers are covered. The Act applies to tips received by workers at your premises, including agency staff. Make sure your policy explains how tips are allocated and that records clearly show payments made to all workers covered by the scheme.

10. Your payroll system reflects the tronc scheme accurately. Tips should be processed through payroll with the correct tax treatment and clearly shown on payslips as separate from regular wages. Make sure your payroll records match data from your POS system and tip allocation records to maintain a clear audit trail.

Stay compliant without the admin burden with Nory’s agentic AI system

Keeping up with changing regulations is a constant challenge for restaurant operators, especially when you’re managing multiple locations. From maintaining tip records to ensuring payroll processes are accurate, compliance often involves time-consuming manual checks and paperwork.

Nory’s AI Compliance Assistant helps reduce this burden by continuously monitoring your operations and flagging potential compliance risks before they become issues. Instead of relying on spreadsheets, manual audits, or managers remembering every requirement, operators get real-time visibility into compliance across their entire estate.

The result? Fewer Allocation of Tips Act compliance risks and more confidence that every location is following the right processes.

Recommended reading: The future of restaurant compliance: From manual checks to AI assistants. 

What changed operationally on 1 October 2024

For many UK restaurants, the Act codified best practice they were already following. For others, it required real change in the way they handled tips for their staff. 

Here are the most common operational shifts:

For operators running a compliant tronc scheme before October 2024, the Act mostly ratifies existing practice. For operators handling tips ad-hoc, October 2024 was a hard reset.

Find out more about distributing tips fairly as an employer. 

The Code of Practice: What “fair allocation” really means

The statutory Code of Practice was published in July 2024, alongside the Act coming into force. The Code is the practical guidance that operators must follow, and it's what the Employment Tribunal will reference if a dispute arises.

The Code identifies how to comply with the Tips Act, UK, including the factors that make an allocation “fair”: 

• Hours worked: Pro-rating tips to time worked is standard.

• Role and responsibility: Front-of-house typically shares more directly, back-of-house allocation is legitimate too. 

• Tenure and experience: Longer-serving staff can receive a proportionally larger share.

• Individual and team performance: Where measurable and documented.

• Customer feedback: Where relevant to the tip received.

• Type of tip: Cash tips, card tips, and service charges can be treated slightly differently, if the policy is clear. 

The Code is explicit that management discretion alone is not “fair”. If the policy is that the manager decides how to allocate tips, that fails the Act's transparency requirement.

The Code also identifies unfair factors for allocation: 

• Protected characteristics (age, sex, race, disability, etc.), which are treated as discrimination.

• Whether the worker complained about pay or conditions.

• Trade union membership.

• Whistleblowing history.

Most operators use a hybrid: a policy that pro-rates by hours worked, weights by role, and allows a modest performance loading.

The tronc question: Do you need one, and how does it work in 2026?

A tronc is a separate payroll arrangement specifically for the distribution of tips. It's a long-standing UK mechanism, and it survived the Act intact.

Why operators use a tronc: The main reason is National Insurance. 

Tips distributed through a compliant tronc system are exempt from employer National Insurance contributions, and employee National Insurance too. On card tips of £50,000 per year across a site, that's a meaningful saving.

Here’s how a compliant tronc works in 2026:

• A troncmaster is appointed. This person must be independent of decisions about worker pay — usually a senior staff member (headwaiter, restaurant manager) or, for larger groups, an external tronc administration service.

• The troncmaster is responsible for allocating tips per the written policy, not the owner or the general manager. This independence is what secures the National Insurance treatment.

• Tips flow through payroll, but as tronc distributions rather than as ordinary pay. Payslips show them separately.

• The troncmaster maintains records of allocations. These are the records the Act requires operators to keep for three years.

Whether the tronc is administered in-house or outsourced, the key requirements are: independence of the troncmaster, clear written policy, fair allocation per the Code of Practice, and integration with payroll to apply”?

Get more guidance from HMRC about the tronc scheme requirements for 2024 and beyond.

Did you know that Nory's Payroll Assistant handles this process natively? 

Card tips captured from the POS flow into the tronc scheme, are allocated per the distribution rules configured (equal, points-based by role/tenure/performance, or a hybrid), and land on the payslip with the correct tax treatment. 

Compliance with the Act is built in. The tronc scheme is configured once, the operation runs automatically from there on. 

Recommended reading: The ultimate guide to AI restaurant payroll software, UK. 

Employment Allocation of Tips Act penalties and enforcement

Enforcement of the Act is via the Employment Tribunal, not HMRC directly (though HMRC handles the tax treatment separately). Workers can claim compensation plus additional costs for financial loss:

• Up to two weeks' pay per worker where a proven violation has occurred.

• Additional compensation for financial loss caused by the violation.

• Injury to feelings awards where the violation was particularly serious (relatively rare in early enforcement).

Beyond individual compensation, there's a public register of non-compliant employers. 

Operators added to this register face reputational damage that can outlast any financial penalty (like struggling to hire new staff or losing business if customers hear about not fairly allocating tips) .

In practice, early enforcement has focused on the clearest violations: 

• Employers who retained a percentage of card tips
• Employers with no written policy
• Employers who couldn't produce records when workers requested them

The straightforward compliance work (items 1, 2, and 5 above) protects against the most common enforcement scenarios.

How compliance affects your payroll workflow

Compliance with the Tips Act creates real operational work. Every pay cycle, the operator has to:

• Capture tips accurately from every channel (card, cash, service charge)
• Allocate them per the written policy
• Distribute via the tronc scheme with correct tax treatment
• Update records (retention, worker access)
• Ensure the payslip reflects the correct allocation
• File the necessary submissions

Done manually, this is hours of admin per pay run per site. For a 20-site group, it's a genuine drag on the payroll and HR team.

The alternative is a payroll platform that handles the full flow natively, like Nory's Payroll  which does this end-to-end:

• The POS integration captures every tip (card, cash where declared, service charge) at the point of transaction.

• The tronc rules are configured once per site (equal, points-based, or hybrid) and distribute tips per your written policy.

• The payroll flow runs the tronc distributions through the pay run with correct PAYE/NIC treatment. 

• Payslips show tronc distributions clearly, satisfying the transparency requirement.

• Records are retained for the statutory period, and workers can access their own via the Nory app. 

Nory in action: Roasting Plant Coffee replaced a manual payroll process with Nory’s Payroll Assistant, bringing payroll into the same platform as scheduling and workforce management. The team reduced payroll processing time from two days to just one hour, while improving accuracy and reducing the risk of manual errors.

It’s quicker when everything is on Nory now — no need for separate Excel sheets. Plus, there’s far less chance of human error.
Inga Kazlauskaite, General Group Manager, Roasting Plant Coffee

FAQs about the Employment Allocation of Tips Act 

What does the Employment (Allocation of Tips) Act 2024 actually require?

The Act requires UK employers to pass 100% of tips, gratuities, and service charges to workers, allocate them fairly and transparently via a written policy, and keep records of tips received and allocated for three years. Workers have a right to request access to records covering their own allocation.

What's the difference between a service charge and a tip under the Act?

Both are covered by the Act. Tips (voluntary cash or card gratuities) and service charges (whether mandatory or discretionary) must all be passed to workers in full. The Act doesn’t distinguish between them in terms of employer obligations.

Do I need a tronc scheme? 

No, tronc compliance for restaurants isn’t a requirement of the UK restaurant tips law. However, a compliant tronc scheme is the main way to legally exempt tips from National Insurance contributions (both employer and employee). 

For most operators with meaningful tip volume, a tronc is worth the setup effort (and remember, Nory's Payroll supports tronc scheme configuration natively!). 

What counts as “fair” allocation of tips in the Employment Allocation of Tips Act 2023?

The Code of Practice identifies acceptable factors: hours worked, role and responsibility, tenure, performance, and customer feedback. Management discretion alone is not “fair”. The policy must be written, transparent, and applied consistently. 

What are the penalties for non-compliance with the Tips Act?

Workers can bring Employment Tribunal claims. Compensation includes up to two weeks' pay per affected worker plus additional financial-loss compensation. Beyond individual claims, there's a public register of non-compliant employers, which creates reputational risk that outlasts financial penalties.

How does Nory's Payroll handle Tips Act compliance?

Nory's hospitality payroll software captures tips from the POS, applies the tronc distribution rules configured per site, runs the allocation through the pay cycle with correct PAYE and NIC treatment, shows the allocation on payslips, and maintains records for the statutory three-year period. 

Compliance with the Act is built into the payroll workflow so you don’t have to worry about managing it manually. 

Recommended reading: Automate your tip management with Nory.

Stay compliant with smarter tip management

The Employment (Allocation of Tips) Act 2024 introduced clear requirements for UK restaurants: 100% of tips must go to workers, allocations must be fair and transparent, and detailed records must be maintained for three years. 

For multi-site operators, keeping track of tip collection, tronc rules, payroll, and employee access requests can quickly become a complex admin task.

Nory’s agentic AI restaurant operating system simplifies compliance by bringing tips, payroll, and workforce management into one platform. With the AI Payroll Assistant, operators can automate tronc allocations, connect POS-captured tips directly to payroll, and maintain accurate records without relying on spreadsheets or manual processes.

Book a call with the Nory team to make restaurant compliance easier, or find out more about using Nory to manage payroll. 

Disclosure and methodology

This guide is published by Nory. We build agentic AI restaurant payroll software that handles tronc and Tips Act compliance natively. We've been careful to keep the regulatory content accurate and operator-focused, and the product mention is confined to the sections where it's relevant.

This guide is general operational information, not legal advice. The Act, the Code of Practice, and case law will continue to evolve. Check the sources above for the current position, and consult your legal team on your specific circumstances.