If you’re running a hospitality business, you’ve probably heard about the Employment Rights Bill. The Bill received Royal Assent on 18 December 2025, officially becoming the Employment Rights Act 2025, and it’s bringing some of the biggest changes to employment law in a generation.
For businesses that operate tronc schemes and rely on tipped workers, this legislation is going to touch virtually every aspect of how you manage your team. Some changes are already in force. Others are coming down the line over the next couple of years. Either way, now’s the time to understand what’s changing and start preparing.
Let’s break down what this means for your business, your tronc scheme, and your staff.
The new consultation requirement for tipping policies
You already know that since October 2024, the Employment (Allocation of Tips) Act 2023 has required you to have a written tipping policy and to distribute 100% of tips fairly and transparently. But from October 2026, there’s an additional layer coming.
The Employment Rights Act strengthens the tipping legislation by requiring employers to formally consult with workers before creating or reviewing their tipping policy. This isn’t a quick chat over coffee. It’s a proper consultation process.
Who you need to consult
You must consult with recognised trade union representatives, elected employee representatives, or if you don’t have either of those, directly with your workers. The key word here is “must” – this isn’t optional.
What consultation involves
You need to genuinely seek input from your team about how tips should be allocated. Are front-of-house and back-of-house splits fair? Should points systems reward seniority or performance? These are the conversations you’ll need to have, document, and take seriously.
After consultation, you must make available an anonymised summary of the feedback you received. This summary needs to be accessible to all workers, so everyone can see that their voices were heard and considered.
The review cycle
Your tipping policy must be reviewed at least once every three years, with full consultation each time. That means this isn’t a one-and-done exercise. It’s an ongoing commitment to fairness and transparency.
What this means for tronc schemes
If you operate a tronc scheme, your tronc constitution should already outline your distribution rules clearly. The new consultation requirement means you’ll need to involve your team in reviewing and potentially revising these rules. So if you didn’t do a thorough consultation before implementing the scheme, you will need to do this, even with a tronc scheme in place.
Remember, if an employee believes tips aren’t being distributed fairly, they can take the matter to an employment tribunal. Without evidence that you properly consulted staff, your defence becomes significantly weaker. The potential penalty is up to £5,000 per affected employee.
Day one rights (well, almost)
One of the headline changes in the Employment Rights Act is the introduction of “day one” employment rights. Originally, the government planned to abolish the two-year qualifying period for unfair dismissal protection entirely. However, following consultation and amendments in the House of Lords, the final version takes a slightly different approach.
What’s actually changing
From January 2027, the qualifying period for ordinary unfair dismissal claims will be reduced from two years to six months. While not quite “day one,” this still means workers gain protection much faster than before.
There will also be a statutory probationary period during which employers can dismiss for certain specific reasons. However, the details of this probationary period are still being ironed out in secondary legislation. Dismissals during probation will need to be handled carefully and fairly, even if the threshold for unfair dismissal is different.
Why this matters for hospitality
Hospitality has notoriously high staff turnover. With protections kicking in at six months instead of two years, you’ll need to be more careful about your recruitment, onboarding, and management practices from the start.
If you’ve already got strong HR practices, clear performance management, and proper documentation, you should be fine. The challenge will be for businesses that have relied on the two-year buffer to avoid dealing with underperformance issues properly.
Zero-hours contracts and guaranteed hours
For an industry built on flexible staffing, this is the change that’s going to require the most adjustment. The Employment Rights Act targets what it calls “exploitative” zero-hours contracts, and the hospitality sector uses more zero-hours contracts than any other sector.
The 12-week reference period
If a worker on a zero-hours contract works a regular pattern for 12 weeks, they’ll have the right to request a contract that reflects those hours. For example, if someone consistently works three shifts a week over that 12-week period, they can ask for guaranteed hours that match that pattern.
What “regular” means
This doesn’t mean exactly the same hours every week, but it does mean a consistent pattern. Someone who works 20 hours one week, 25 the next, then 18, but always across three or four shifts, has a regular pattern. You’ll need to be tracking actual hours worked versus contracted hours to identify these patterns.
The shift cancellation rules
Under the predictable working patterns requirements, if you cancel, cut, or move shifts at short notice, you’ll need to pay compensation. “Short notice” has been defined as under 48 hours. The exact compensation amounts are still being finalised, but this is coming, and it’ll affect how you manage your rota.
What this means in practice
Let’s say you’re a restaurant with 15 front-of-house staff on zero-hours contracts. After the 12-week reference period, you identify that eight of them have regular patterns. Those eight workers can request guaranteed hours contracts. You can’t just refuse. You need to have a genuine business reason if you’re going to turn down their request.
This doesn’t mean the end of flexibility. Workers who genuinely want casual, ad-hoc shifts can still have them. But you’ll need to be able to demonstrate that the arrangement is genuinely at the worker’s request, not just convenient for you.
Statutory sick pay from day one
Currently, sick pay is only available after the fourth day of sickness and only for workers who earn above the lower earnings limit. The Employment Rights Act changes this.
From the date this provision comes into force (expected in 2026), all eligible employees will be able to claim statutory sick pay from the first day of absence. This removes the three-day waiting period, which means your costs for staff sickness are going to increase.
The hospitality impact
Given that hospitality workers are often lower-paid and may previously have struggled to meet the lower earnings limit, this change will benefit your team. But it’s another cost pressure on top of recent National Insurance increases and the rise in National Minimum Wage.
You’ll want to review your absence management policies and make sure you’re tracking sickness effectively. Poor absence management could get expensive fast under the new rules.
Enhanced protection against sexual harassment
This one’s particularly relevant for hospitality, where staff regularly interact with the public and are unfortunately more exposed to inappropriate behaviour from customers.
The duty to prevent sexual harassment came into force in October 2024, requiring employers to take “reasonable steps” to prevent harassment. The Employment Rights Act strengthens this to require employers to take “all reasonable steps” – a higher bar.
The third-party element
Crucially, the Act extends the duty to cover harassment by third parties, including customers. If a customer harasses a member of your team, you now have a legal duty to take all reasonable steps to prevent it.
What you need to do
This means having clear policies, training all staff (including management), conducting risk assessments for customer-facing roles, and taking action when incidents occur. You can’t just shrug and say “customers will be customers” anymore.
If you fail to comply with this duty and a harassment case goes to a tribunal, the compensation can be increased by up to 25%. This isn’t about tick-box compliance. It’s about creating a workplace culture where harassment isn’t tolerated, whether it comes from colleagues or customers.
Flexible working requests from day one
Workers already have the right to request flexible working, but currently, they need 26 weeks of service first. The Employment Rights Act removes that waiting period.
From day one of employment, workers can request flexible working arrangements. For hospitality, this covers requests for things like consistent shift patterns, adjustments to start and finish times, or working specific days of the week.
You can still refuse requests if there are legitimate business reasons (and they often are in hospitality), but you’ll need to handle requests properly and respond within the timescales set out in the legislation.
Fire and rehire restrictions
The Employment Rights Act significantly restricts the practice of “fire and rehire” – where employers dismiss staff and immediately re-employ them on worse terms.
Dismissals connected to changes in terms and conditions will be automatically unfair unless the employer can show they’re acting in response to genuine financial difficulties that threaten the viability of the business. Even then, the burden of proof will be much higher than before.
This doesn’t mean you can never change terms and conditions. But you’ll need to negotiate changes properly, consult meaningfully with staff, and demonstrate that you’ve tried alternative approaches first.
Collective redundancy consultation changes
The rules around collective redundancies are being strengthened. Currently, you need to go through collective consultation if you’re making 20 or more people redundant at one establishment within 90 days.
The Employment Rights Act adds a new threshold test that will count employees across all sites or workplaces, not just one location. This is particularly relevant if you operate multiple restaurants, pubs, or hotels. The exact numbers are still being finalised in regulations, but the principle is clear – more situations will require collective consultation.
The maximum protective award for failing to consult properly is also doubling from 90 days’ pay to 180 days’ pay per affected employee. That makes getting redundancy consultation wrong significantly more expensive.
What you need to do now
With so many changes coming, it’s easy to feel overwhelmed. But preparation doesn’t have to be painful. Here’s what you should be doing:
For tipping and tronc schemes
Review your current tipping policy and check that it complies with the October 2024 legislation. If you haven’t already, start thinking about how you’ll consult with your team ahead of the October 2026 consultation requirement. Make sure you’re keeping proper records of all tip distributions and that you can demonstrate fairness in your allocation.
If you use a tronc scheme, verify that your Troncmaster is genuinely independent. Check that your tronc constitution clearly outlines your distribution rules and consider whether those rules will stand up to scrutiny when you’re required to consult staff on them.
For general employment practices
Audit your zero-hours contracts and identify workers with regular patterns. Start planning how you’ll manage requests for guaranteed hours. Review your absence management and sick pay procedures ahead of the day-one sick pay changes. Update your probationary period processes to reflect the shorter qualifying period for unfair dismissal.
Train your management team on the new sexual harassment prevention duties and conduct risk assessments for customer-facing roles. Review your dismissal and redundancy procedures to ensure they’re robust enough to withstand increased scrutiny.
Get expert help
Employment law is getting more complex, and the penalties for getting it wrong are getting more expensive. Whether it’s setting up a compliant tronc scheme, managing the zero-hours reforms, or handling these new employment rights, professional advice isn’t a luxury anymore. It’s a necessity.
The bigger picture
These changes aren’t designed to make life difficult for hospitality businesses. They’re aimed at improving job security, fairness, and working conditions across all sectors. Hospitality just happens to be disproportionately affected because of its reliance on flexible working patterns, zero-hours contracts, and tipped staff.
The businesses that will thrive under the new rules are the ones that already treat their teams well, pay fairly, and have robust HR practices. If that’s you, these changes will largely codify what you’re already doing. If it’s not, then it’s time to raise your game.
The hospitality sector has always been about people. Great food and drink are important, but it’s your team that creates the experiences customers remember. Fair employment practices aren’t just a legal requirement. They’re good for retention, good for reputation, and ultimately good for business.
Need help with your tronc scheme?
Whether you’re setting up a tronc scheme for the first time, reviewing your existing arrangements, or preparing for the upcoming consultation requirements, we can help. Our team specialises in tronc administration and compliance, taking the complexity out of tips management so you can focus on running your business.
Get in touch to discuss how we can support you through these changes and ensure your tronc scheme remains compliant, fair, and effective.