Key takeaways:
All qualifying tips (card payments, service charges, and employer-controlled tips) must go to workers in full, with no deductions beyond tax and NI.
You need a written tipping policy, detailed distribution records retained for three years, and a fair allocation method that considers hours worked and role type.
Tips must reach workers by the end of the month after they're received.
From October 2026, you'll need to formally consult staff on your tipping policy and review it every three years.
Time tracking and shift records help you demonstrate fair allocation and meet record-keeping requirements without extra admin.
If you run a restaurant in the UK, you already know that tips aren't simple. You're splitting card payments between front-of-house and kitchen staff, tracking service charges across busy shifts, and figuring out what agency workers are owed. The Employment (Allocation of Tips) Act 2023 has been in force since October 2024, and it changed the rules for how you handle all of this.
But there's more coming. The Employment Rights Act 2025 introduces new consultation requirements expected to take effect in October 2026. And with tip volumes rising alongside the UK's tourism recovery, getting your processes right is more urgent than it was a year ago.
This article gives you a practical breakdown of what the tipping act means for restaurant operators specifically, how to set up tip distribution that meets the Act's requirements, and what to prepare for next.
What the Tipping Act requires from your restaurant
The core rule is straightforward: 100% of qualifying tips must go to your workers. You can't take deductions from tips for any reason other than tax and National Insurance. No admin fees, no card processing charges, no "house share." The full amount reaches your team.
But "qualifying tips" has a specific meaning for restaurants. It covers card tips added at the point of sale, service charges you add to bills, and app-based tips where you (the employer) have control over the money at any point. Cash tips left on tables that your waiters pocket directly? Those aren't qualifying tips, unless you collect or pool them through a central system.
Service charges deserve special attention. If you add a discretionary service charge to bills and then distribute it to staff, that's a qualifying tip under the Act. The same applies if your point-of-sale system prompts customers to add a percentage. If you control the money at any stage between the customer paying and the worker receiving it, the Act applies.
Distribution deadlines and record-keeping
You need to get tips into your workers' hands by the end of the month following receipt. If a customer pays a card tip on 15 March, that money must reach the relevant worker by 30 April at the latest.
The record-keeping obligation is just as important. You're required to maintain detailed records of all tips received and distributed for a minimum of three years. Workers have the right to request access to these records, so you need a system that can produce them on demand.
Written policy and agency workers
Where tipping is a regular part of your business (and in restaurants, it almost always is), you need a written tipping policy. This must explain how tips are collected, how they're allocated, the timeline for payments, and how staff can view their records.
Agency workers are entitled to tips on the same basis as your directly employed team. If you use agency staff for busy Friday shifts or holiday cover, they need to be included in your distribution for the hours they worked. This applies even if they're employed by the agency rather than by you directly.
The penalty for getting this wrong? Workers can bring a claim to an Employment Tribunal, which can award compensation of up to £5,000 per affected worker and order future compliance with the Act. For a busy restaurant with 30 staff, that exposure adds up quickly. The ACAS guidance on tips provides further detail on how these obligations apply in practice. For a broader overview of the legislation and your obligations, see our UK tipping legislation guide.
How to set up fair tip distribution in your restaurant
Setting up a system that meets the Act's requirements isn't just about following the law. With international arrivals forecast to exceed 45 million visitors in 2026 and spending projected to surpass £35 billion (according to the Deputy Big Shift Report 2026, UK), tip volumes in UK restaurants are only going one way. Getting your system right now saves you headaches as those volumes grow.
Write a clear tipping policy
Your written policy needs to cover four things: how tips are collected, how they're allocated between staff, the timeline for distribution, and how workers can view their own records.
Make the policy accessible to everyone who works in your restaurant, including agency staff. Pin it up in the break room, include it in onboarding materials, and keep an electronic copy that staff can access anytime. From October 2026, you'll also need to show you've consulted staff on this policy (more on that below).
Choose your distribution method
You have two main options. First, employer-managed distribution, where you handle the maths yourself. This works for smaller restaurants with a single location and a stable team. Second, an independent tronc system, which is better suited to multi-site operations or larger teams.
The factors you'll need to weigh for a restaurant include the split between front-of-house and kitchen staff, hours worked during the period, role type, and seniority. The Code of Practice says allocation must be "fair" but doesn't mandate a specific formula. Your rationale just needs to be documented and transparent.
Gen Z represents 63% of UK hospitality shift workers in 2025 (Deputy Big Shift Report 2026, UK). This generation expects transparency about pay and tips as standard, particularly when hiring in hospitality is competitive. A clear, documented distribution method isn't just a legal requirement; it's what your workforce expects.
Set up your tronc system
A tronc is an independent arrangement for distributing tips, managed by a "troncmaster" (who can be a staff member, an accountant, or an external provider). The key advantage? Tips distributed through a properly run tronc aren't subject to employer National Insurance contributions.
But here's the critical point: even with an independent tronc, the employer remains legally responsible for fair distribution. If the tronc isn't distributing tips fairly, you need to raise concerns, change the troncmaster, or end the arrangement entirely.
Deputy's rota data shows exactly who worked which shifts and hours at each location. This gives you the foundation for hours-based tip allocation, whether you manage distribution yourself or provide data to your troncmaster. UK restaurant chains like Honest Burgers are managing these tipping challenges at scale across hundreds of team members, relying on accurate shift records to inform fair distribution.
What's changing in October 2026
The Employment Rights Act 2025 builds on the original Tipping Act with new consultation requirements. Under these provisions, you'll need to formally consult with your workforce (or their trade union representatives) about your tips policy before it takes effect.
This means more than just handing out a policy document. You'll need to demonstrate that you've shared the proposed policy, given workers a genuine opportunity to provide feedback, and considered their input before finalising the approach. For restaurants with trade union representation, you'll consult through those channels. For everyone else, direct consultation with staff is the requirement.
A review of the policy, subject to further consultation, must then take place every three years. This isn't a one-and-done exercise.
These provisions are expected to come into force in October 2026. The practical implication for restaurant operators is clear: start documenting your consultation process now. If you're already running staff meetings or team briefings about tips, record the dates, attendance, and key discussion points. If you haven't started those conversations, now's the time.
Deputy's team communication tools (like the News Feed feature) give you a way to share policy updates with your team and document that you've done so. Deputy Messaging creates a timestamped record of when information was shared and who received it, which supports your consultation obligations when the new requirements take effect.
