How do UK restaurants have to share tips?

How do UK restaurants have to share tips? Since October 2024, qualifying tips, gratuities and service charges go to workers without deductions, apart from very limited cases such as income tax. They must be allocated fairly and paid no later than the end of the month after the customer paid. Where tips are paid on more than an occasional and exceptional basis, the employer must have a written policy available to all workers, and every tip needs a record kept for three years. The duty to consult workers in the Employment Rights Act 2025 is not in force yet.

What the film covers

• The Tuesday question nobody can answer
• Employment (Allocation of Tips) Act compliance: an owner's checklist
• What counts as a qualifying tip, and the 100% rule
• Fair and transparent allocation: can tips be shared by hours?
• Paid by the end of the following month
• A written tips policy for the restaurant, available to every worker
• Records for three years, and a worker's right to ask
• Agency workers and independent troncs

Questions the film answers

Do I have to pass on every penny of the card tip, even after the card fee?

Yes. The statutory code says tips must be passed on without deductions, except in very limited cases such as income tax. The card-processing fee is a cost the restaurant meets from its own margin, so a £2,150 card pool stays £2,150 for the team even though the provider took its charge.

Is a service charge the same as a tip, and who gets it?

For the Act, an employer-received service charge is a qualifying amount and is allocated like a tip. For tax and VAT they differ: a mandatory service charge is standard rated for VAT and National Insurance is always due when it is paid out to employees. A genuinely optional one is outside the scope of VAT.

Can I split tips by hours worked, or must it be equal shares?

Hours worked is a factor the code lists, and equal shares are not required. The choice must be fair and reasonable for the business, applied as the written policy says, and supported by hours that can be shown. The rota is the natural source of those hours.

By when must I pay out, and what do I write down?

Pay no later than the end of the month after the customer paid, so a tip left on 23 October is due by 30 November. Write down the total received, the amount allocated to each worker, the basis and the payment date. The record is kept for three years.

How long do I keep tips records, and what can a waiter ask to see?

Keep the record for three years from the date the tip was paid. A worker may make a written request for the records for a place of business where they worked, covering up to three years, and may make one request in any three-month period.

Do I need a tronc scheme, and does it save employer NI?

Not necessarily. Employer National Insurance is not due on tronc payments when the employer takes no part in allocation, but the tronc must be genuinely independent and the allocation still has to be fair. The answer depends on your facts, so take an accountant's advice before changing how you pay.