Tips, tronc and the 2023 Act: what club operators must now do

The Employment (Allocation of Tips) Act 2023, together with its statutory Code of Practice, moved tipping from custom to law. The core obligations are simple to state and uncomfortable for operators who had been quietly retaining a share.

• All qualifying tips, gratuities and service charges must be passed to workers in full.
• Allocation between workers must be fair, and the employer must have regard to the Code.
• Payment must be made no later than the end of the month following the month in which the customer paid.
• Employers must have a written tipping policy and make it available to workers.
• Records must be kept for three years, and workers may request their own data.

Deductions are prohibited beyond those required by law. Card processing fees, breakages and administration costs cannot be taken out of the pot.

The rules apply to employer-received tips, meaning anything the employer controls or significantly influences. Card tips and service charge added to a bill are the obvious cases. Cash left on a table and kept by the worker is generally outside the regime, because the employer never controls it.

Members' clubs have a specific complication: charges added to a member's account and settled monthly are still service charge. The delay in settlement does not change the character of the payment, and the payment deadline runs from when the customer pays.

Fair allocation does not require identical shares. The Code contemplates factors such as role, hours worked, seniority, performance and customer-facing contribution. What it requires is that the factors are legitimate, applied consistently and capable of being explained.

Back of house can be included, and in most operations should be. What is difficult to defend is a distribution that quietly concentrates on a small group, or one where nobody can articulate the rule being applied.

A tronc is an arrangement under which an independent troncmaster allocates tips among staff. Its attraction is fiscal: where the arrangement is genuinely independent of the employer, distributions can fall outside National Insurance contributions, which benefits both worker and employer.

Independence is the whole point and the usual failure. If management decides the allocation, appoints and directs the troncmaster, or overrides decisions, the arrangement is not independent and the tax treatment falls away. The 2023 Act does not prohibit tronc, but a tronc must still produce a fair allocation, and the employer remains answerable for that.

Workers can bring a complaint to an employment tribunal. For failures of allocation or payment the tribunal can order payment of what was due and compensation for consequential loss. For failures of the policy and record-keeping duties it can order compliance and make a compensatory award. Time limits are short, which in practice means complaints arrive quickly after a worker leaves.

• A written tipping policy that staff can actually find, not a paragraph in a handbook nobody has.
• An allocation method someone can explain in a sentence, applied the same way every month.
• Payment within the statutory deadline, evidenced on the payslip.
• Three years of records, retrievable per worker.
• If a tronc is used, genuine independence, documented, with the troncmaster free to decide.

Most clubs are closer to compliance than they fear. The gap is usually documentation rather than conduct: the allocation is already broadly fair, but nothing is written down and nothing is recorded.