For businesses in the hospitality sector operating a tronc scheme, understanding the consultation requirements is not just a matter of good practice; it’s a legal obligation that keeps your scheme HMRC-compliant and tax-efficient.
And the Employment Rights Act 2025 is now law, and significant new tipping consultation requirementsare coming into force in October 2026; employers need to understand both existing best practices and upcoming mandatory obligations.
In this article, we’ll take a look at what consultation actually means for your tronc scheme, what’s changing under the Employment Rights Act 2025, and how to get it right.
What is a tronc scheme?
Quick refresher: a tronc scheme is a formal way of distributing tips, gratuities, and service charges to your team. When it’s properly set up and run by an independent Troncmaster, these payments can be made without National Insurance Contributions – saving money for both your business and your staff.
The keyword there is “properly.” That’s where consultation comes in.
So what does “consultation” actually mean?
In tronc terms, consultation means talking to your employees before you set up a scheme or make significant changes to an existing one. It’s about genuinely involving them in the process. Think of it as seeking their views, considering their feedback properly, and showing how their concerns have shaped the final scheme. It’s a conversation, not an announcement.
The legal framework – current and future requirements
Right now, consultation requirements come from two places.
- HMRC expects you to show that employees have been meaningfully involved in decisions about how their tips are distributed.
- The Employment (Allocation of Tips) Act 2023, which kicked in October 2024, strongly encourages consultation as part of creating a fair and transparent tips policy.
But the Employment Rights Act 2025 (which received Royal Assent in December 2025) has ramped this up a notch and makes consultation mandatory from October 2026. This is a big shift from “you really should” to “you absolutely must.”
From October 2026, you’ll be legally required to consult with either a recognised trade union or worker representatives before creating or changing your tipping policy. No ifs, no buts.
What’s changing with the Employment Rights Act 2025
The Employment Rights Act 2025 introduces three major new requirements that will transform how tronc consultation operates from October 2026.
1. Mandatory Consultation Requirement
Before you create your first written tipping policy or change an existing one, you must consult with either a recognised trade union or elected worker representatives. This has to happen before the policy goes live.
This is a complete departure from the current setup, where consultation is just encouraged. From October 2026, skip this step, and you could be facing employment tribunal claims.
2. Three-year review cycle
Your tipping policy now needs to be reviewed every three years from the date you implemented it. Each time you review it, you must complete the full consultation process again.
No more “set it and forget it.” If you put a policy in place after October 2024, your first mandatory review will probably hit in 2027.
3. Anonymised feedback summaries
Perhaps one of the most interesting new requirements is that employers must provide all staff with an anonymised summary of the feedback received during consultation. This summary must be made available at the business location where the tips policy is implemented.
This requirement significantly enhances transparency and demonstrates to employees that their input has been genuinely considered. It also creates a documentation trail that could prove valuable should any disputes arise about the fairness of the consultation process.
Timeline for compliance
Here’s how it all rolls out:
- October 2024: Employment (Allocation of Tips) Act 2023 in force—written tips policy required, consultation encouraged
- December 2025: Employment Rights Act 2025 receives Royal Assent
- Winter 2025/Early 2026: Government consultation on implementation details
- October 2026: Mandatory consultation requirements come into force
- 2027 onwards: First three-year reviews due for policies implemented post-October 2024
Why consultation matters (beyond just ticking boxes)
Protecting your scheme’s tax status
HMRC needs to see that tronc distributions are made independently of you as the employer. Consultation proves that employees have had input into the scheme’s structure and that it runs for their benefit, not just yours. This independence is crucial for keeping those National Insurance savings that make tronc
schemes worthwhile.
Keeping things fair and transparent
Tips and service charges can make up a big chunk of your team’s income. Consultation ensures that how you distribute them feels fair to everyone receiving them. That keeps morale up and disputes down.
Staying on the right side of the law
Proper consultation protects you from legal challenges. From October 2026, failing to consult won’t just be poor form; it’ll be a breach of statutory requirements that could land you in an employment tribunal. Staff who feel they weren’t consulted about changes affecting their pay will have solid grounds for
claims.
The statutory Code of Practice already carries legal weight, meaning tribunals must consider its recommendations when looking at complaints. The mandatory consultation requirements will give employees even stronger grounds to challenge unfair tipping practices.
Better scheme design
Perhaps most practically, consultation often leads to better schemes. Your team working on the front line understand the realities of service delivery in ways management might not. Their insights can be invaluable.
Who do you need to consult with?
The Employment Rights Act 2025 says you must consult with either a recognised trade union or worker representatives. Getting this right is crucial for compliance.
Recognised trade unions
If you have a recognised trade union at your workplace, consulting with them satisfies the statutory requirement. The union represents the collective interests of its members and can give you structured feedback on behalf of the workforce.
Recognition can be voluntary (where you agree to recognise the union) or statutory (following the formal recognition procedure). If you have a recognised union for collective bargaining, they’re your consultation partner for tipping policy too.
Worker representatives
If your workplace does not have a recognised union, then you need to consult with worker representatives. These can be:
- Existing representatives: If you already have elected employee representatives (for health and safety or information and consultation, for example), they might be suitable for tipping policy consultation too
- Newly elected representatives: If you don’t have suitable representatives, you’ll need to arrange for workers to elect some specifically for consultation on tipping matters
The election process needs to be fair and transparent. All workers affected by the tipping policy should get the chance to stand for election and to vote. Representatives need adequate time and facilities to consult with the people they’re representing.
A note for smaller businesses
If you’re a smaller business without formal representative structures, setting up worker representation specifically for tipping consultation might feel like a lot of admin. But the legal position is clear – formalising workplace collaboration is essential for ensuring fair treatment, particularly in sectors where
tips form a substantial part of income.
You can’t just chat with individual employees and call it consultation; the legislation specifically requires consultation with collective representatives.
What you need to consult about
Key topics should include:
- Distribution methodology: How tips will be allocated among staff (points system, equal distribution, role-based weighting, etc.)
- Eligible employees: Which roles and staff members will participate in the tronc
- Payment frequency: How often tronc distributions will be made (remember, legislation says they must be paid no later than the month following receipt)
- Governance: How the scheme will be administered and who’ll serve as Troncmaster
- Transparency measures: How information about tips received and distributed will be communicated
- Dispute resolution: Procedures for addressing concerns about the scheme’s operation
How to conduct effective consultation
Meaningful consultation takes more than a single announcement or email. Here’s a practical approach that’s robust, compliant with current expectations, and ready for October 2026.
Step 1: Planning and preparation
Before you approach employees, develop a draft proposal for your tronc scheme. This should outline the proposed structure, distribution methods, and why you’ve made the decisions you have. Having something concrete gives employees something to respond to, rather than asking them to design a scheme from scratch.
Step 2: Initial communication
Present your draft proposal to your recognised trade union or worker representatives. Right now, you might also communicate directly with all affected employees, but from October 2026, the statutory consultation requirement is specifically with collective representatives.
Make sure the information is accessible and that representatives understand both the proposed scheme and their role in the consultation. Give them adequate time and resources to consult with the workers they represent.
Key things to communicate:
- The purpose of the tronc
- How it will benefit employees
- The proposed distribution method
- The timeline for implementation
- How feedback should be provided
Step 3: Gathering feedback
Give your trade union or worker representatives time to gather views from their constituents and put together collective feedback. Representatives should get reasonable time off to do this, and access to appropriate facilities for meetings.
They might want to run surveys, hold group meetings, or gather feedback in other ways. As the employer, you should facilitate this process rather than directing it.
Allow adequate time, typically at least two to four weeks, for significant scheme changes, though the exact timeframe should be agreed with the representatives.
Step 4: Considering and responding
This is where consultation becomes truly meaningful. Review all the feedback you’ve received and genuinely consider whether you should make changes based on employee input. Where you implement suggestions, acknowledge it. Where concerns are raised, but you’re not changing the proposal, explain why.
Step 5: Final communication
Once consultation is complete, communicate the final scheme design to all employees, highlighting how feedback from their representatives influenced the outcome. Provide written documentation of the scheme rules so everyone understands how the tronc will work.
Crucially, from October 2026, you must provide an anonymised summary of the feedback received during consultation. This summary should be displayed at the business location and should show how worker input was considered in the final policy design.
Step 6: Documentation
Keep comprehensive records of your consultation process. This is particularly important given the upcoming statutory requirements. Your documentation should include:
- Details of who was consulted (which trade union or which worker representatives)
- Evidence of how representatives were elected (if applicable)
- Meeting minutes and correspondence with representatives
- The feedback received (which will form the basis of your anonymised summary)
- Documentation of how feedback influenced final decisions
- The anonymised feedback summary provided to staff
- Confirmation of when and where the summary was made available
This documentation is essential if HMRC, an employment tribunal, or the forthcoming Fair Work Agency ever questions whether you did adequate consultation.
Common consultation pitfalls (and how to avoid them)
Going through the motions
Consultation must be genuine. If you’ve already made all your decisions and are just informing representatives after the fact, that’s not consultation, it’s an announcement. From October 2026, this approach won’t just fail to meet the statutory requirement; it could expose you to tribunal claims. Representatives
will spot box-ticking exercises a mile off, and tribunals won’t be sympathetic.
Insufficient time
Rushing consultation to meet implementation deadlines often backfires. Employees need proper time to understand proposals and formulate considered responses.
Limited communication channels
Right now, relying solely on one method of communication (like email) might exclude employees who aren’t comfortable with that format. From October 2026, the primary communication must be with trade union or worker representatives, though you should still ensure representatives can effectively communicate with
their constituents.
Failing to document
Without proper records, you can’t prove that meaningful consultation happened, even if it did. Documentation protects both you and your employees.
Treating it as a one-off
Consultation isn’t a one-time event. Significant changes to an established tronc scheme require fresh consultation. And from October 2026, you must review and re-consult on your tipping policy every three years. Failing to schedule and complete these reviews will put you in breach of statutory obligations.
The Troncmaster’s role in consultation
While you, as the employer, typically lead initial consultation about setting up a tronc scheme, the Troncmaster plays an important ongoing role. As the independent party responsible for distributing tips fairly, the Troncmaster should maintain open communication with employees about how the scheme is operating.
This might include regular updates on amounts received and distributed, being available to discuss concerns about fairness, and recommending adjustments to distribution methods based on employee feedback. The Troncmaster acts as a bridge between management and staff, ensuring the scheme continues to operate in
employees’ interests.
Consulting on scheme changes
What happens when you need to modify an existing tronc scheme? Maybe your business has expanded, your service delivery model has changed, or the existing distribution method is causing disputes. Any significant change to the scheme’s structure or operation needs fresh consultation.
From October 2026, this gets more structured. Not only must you consult on significant changes, but you must also conduct a full review and consultation process every three years, regardless of whether you think changes are necessary. This creates a regular cycle of engagement that keeps your tipping policy fair and supported by your workforce.
The scope of consultation should be proportionate to the change proposed. Minor administrative tweaks might only need basic communication with representatives, while fundamental changes to distribution methodology need full consultation comparable to setting up a new scheme. However, the mandatory three-year review will always require full consultation, even if no changes are ultimately made.
Best practices for ongoing engagement
Beyond formal consultation requirements, maintaining ongoing engagement with employees about the tronc scheme helps it succeed and prepares you well for those mandatory three-year review cycles starting in October 2026.
Consider setting up a tronc committee with worker representatives who can provide regular feedback on the scheme’s operation between formal consultation cycles. This doesn’t replace the statutory consultation requirement, but can help identify issues early and build trust.
Schedule periodic informal reviews (perhaps annually) to assess whether the distribution method still works. While these won’t satisfy the mandatory three-year consultation requirement, they demonstrate an ongoing commitment to fairness and can make the formal consultation process more straightforward.
Create clear channels for workers to raise concerns or suggestions at any time. Representatives should have a direct line to management for raising systemic issues with the tipping policy.
Transparency is paramount. Regular reporting on tips received and distributed helps employees understand how the scheme operates and builds trust in its fairness. Consider how the anonymised feedback summaries required from October 2026 can be integrated into your broader transparency practices.
Preparing for October 2026 – your action plan
If you operate a tronc scheme or are planning to implement one, now’s the time to prepare for the new requirements. Here’s what you should be doing:
Immediate actions (early 2026)
- Review your current consultation practices: If you implemented a tipping policy after October 2024, assess whether your consultation process would meet the higher standards coming in October 2026
- Identify your consultation partners: Do you have a recognised trade union? If not, do you have existing worker representatives who could fulfil this role, or will you need to arrange elections?
- Review documentation: Make sure you have proper records of any consultation already conducted, as this will help demonstrate good practice
- Monitor government consultations: The government is expected to consult on implementation details in early 2026. Respond to these consultations or monitor their outcomes to understand the final requirements
Preparation actions (mid 2026)
- Establish representative structures: If you don’t have appropriate representatives, allow time for workers to elect them before October 2026
- Review and update your tipping policy: Use this as an opportunity to ensure your policy reflects current best practice under the Code of Practice
- Develop consultation procedures: Create a clear process for how you’ll consult with representatives on tipping matters
- Train management: Make sure managers understand the new consultation requirements and the importance of genuine engagement
Implementation (October 2026 onwards)
- Conduct compliant consultation: Before any new or revised tipping policy takes effect, complete a full consultation with your trade union or worker representatives
- Create anonymised feedback summaries: Develop templates and processes for creating and displaying these summaries
- Schedule three-year reviews: Diarise when your policy will require its first mandatory review and build in time for the consultation process
- Monitor compliance: The Fair Work Agency (expected to be operational from 2026) will have enforcement powers over employment rights, potentially including tipping regulations
Don’t wait! Although the mandatory requirements don’t take effect until October 2026, implementing robust consultation practices now shows good faith and prepares your business for the changes ahead. It also builds valuable experience with collaborative decision-making that’ll serve you well under the new
framework.
Need help with your tronc scheme?
Navigating tronc compliance can be complex, especially with these significant changes on the horizon. At Tips and Troncs, we have years of experience advising on tronc schemes and acting as Troncmasters across a diverse range of hospitality businesses.
If you’d like expert guidance on consultation requirements or any aspect of running a compliant tronc scheme, get in touch with our team