Allocation of tips policy

Our policy sets out how you ensure that all tips paid are dealt with in accordance with the law, including how you allocate tips.

Legislation

From 1 October 2024, the Employment Rights Act 1996 provides that you must:

• pass on all tips to your workers, including eligible agency workers, without deductions (except deductions required by law, such as income tax)
• ensure tips are allocated and distributed to workers in a fair and transparent manner where either you receive the tips, or you exercise control or significant influence over their allocation, and then make payment of tips to workers in full by no later than the end of the month following the month in which the tip was received
• have regard to the statutory Code of Practice on Fair and Transparent Distribution of Tips
• where tips are paid at your place of business on “more than an occasional and exceptional basis”, maintain a written policy on how tips are dealt with and make this available to workers
• keep a record of all tips paid at your place of business and their allocation between each worker - you must maintain this for three years from the date on which the tip was paid, and workers have the right to request access to certain parts of it.

If it’s fair to do so, you can arrange for tips to be allocated between workers by an independent tronc operator. Note that if a worker is permitted to receive and keep a cash tip, with no employer control or involvement, it falls outside the scope of the legislation.

Written policy

The Code of Practice sets out key principles of fairness and says that fair allocation doesn’t necessarily involve allocating the same proportion of tips to all workers, and that you can determine the allocation by reference to a clear and objective set of factors which are fair and reasonable given the circumstances and nature of your business. It then suggests the following list of factors (which is illustrative rather than exhaustive): (1) type of role or work; (2) level of basic pay; (3) hours worked during the period when tips are received; (4) individual and/or team performance; (5) seniority or level of responsibility; (6) length of employment; and (7) customer intention. So, it’s for you to decide on a system of tips allocation, but the Code of Practice does say that you should first consult with your workers to seek their broad agreement that your system is fair and clear. Your written policy must also say: (1) whether you require or encourage customers to pay tips; and (2) how you ensure that all tips paid are dealt with in accordance with the legislation, including how you allocate tips between workers. Our Allocation of Tips Policy is a starting point for you to put a written policy in place. However, it only includes two optional simple methods of tip allocation - either based simply on number of hours worked by each worker or based entirely on the customer’s intention. If you want a more complicated tips allocation system which takes account of various factors, you’ll need to draft and insert it accordingly. You’ll also need to amend our policy if you’re using a tronc system.