In the hospitality sector, tips are a significant part of their income, so ensuring they receive their fair share is important. When employers don’t distribute tips fairly or keep money that should go to staff, it’s not just unfair; since the Allocation of Tips Bill came into legislation in October 2024, it is also illegal.
Employers must distribute all tips, gratuities, and service charges fairly among workers. They can only make deductions for tax as tips belong to workers, not businesses.
But what happens if, as an employee, you feel you are not getting your fair share of tips, or that your employer is withholding or making deductions?
Warning signs your tips aren’t being handled properly
There are several red flags to watch for.
- Your employer might be keeping part of the tips for “admin costs” or business expenses.
- Tips could be going to managers who don’t normally receive them
- You might not be getting cash tips that customers clearly left for staff.
- Tip distribution could seem unfair or random.
- You might be getting charged for uniforms or breakages using tip money
- Tips are being used to top up your salary to National Minimum Wage levels (this is a breach of NMW compliance)
What you can do about it
Keep detailed records
Start documenting everything now. Note dates, amounts, and types of tips you should have received. Keep copies of pay slips, rotas, and any written tip policies. Record conversations with management about tip distribution. Save evidence of service charges on customer bills. Ask colleagues to document their
experiences, too.
Check your contract and policies
Review your contract and workplace policies about tips. Your employer should have a clear written policy explaining how tips are distributed. If they don’t, ask for one in writing.
Speak to your employer first
Try addressing the issue directly with your manager or HR department. Ask for clarification about the tip policy and point out specific problems with tip distribution.
Request the policy be followed properly and ask for any changes to be confirmed in writing.
Contact ACAS
ACAS provides free advice on workplace issues. You can call their helpline on 0300 123 1100, use their online chat service, visit acas.org.uk for guidance, or request early conciliation if needed.
ACAS can help you understand your rights. They may be able to resolve the issue without formal action.
Make a complaint to HMRC
HM Revenue and Customs handles complaints about tip distribution under the new legislation. You can report employers who keep tips that should go to workers, don’t distribute tips fairly, or make unlawful deductions from tips.
Contact HMRC through their online reporting service or call their helpline.
Contact your trade union
If you’re a union member, contact your representative immediately. Unions can provide legal support, advice, and representation.
Consider an employment tribunal
For serious violations, you may need to take your case to an employment tribunal. You usually need to contact ACAS first for early conciliation before making a tribunal claim. You generally have three months from when the issue occurred to make a claim.
What employers cannot do
Under the legislation brought in during 2024, employers have clear limits on what they can do with tips.
- They cannot keep any portion of tips for business use.
- They cannot use tips to top up wages to meet minimum wage requirements.
- They cannot make deductions from tips (apart from tax)
- They cannot distribute tips unfairly or randomly.
- They cannot charge employees for uniforms, equipment, or breakages using tip money.
Employers also cannot retaliate against employees for raising concerns about tip distribution.
Understanding tronc schemes
Many UK employers use “tronc” systems to distribute tips fairly. In a tronc system, a “Troncmaster” who can be an internal person or an independent third-party, oversees distribution.
Tips are pooled and shared according to agreed criteria (the Rules of the Tronc Constitution). The system should be transparent and fair. Employees should understand how it works and their entitlement and agree to become a member of the tronc scheme.
Protecting yourself
Although feeling that you have not been treated fairly when it comes to tips can be highly emotive. You may feel like resigning, but try to resolve the issue while still employed if possible. Constructive dismissal claims are harder to prove than direct discrimination.
Work with your colleagues as tip issues often affect multiple staff members. There’s strength in numbers, with collective action often more effective.
Employers may put pressure on you, but know that retaliation from them is illegal. Employers cannot fire you, reduce your hours, or treat you unfairly for asserting your rights about tips.
Tips are part of your income and are your right under UK law. Don’t let employers take advantage of you or keep money that rightfully belongs to you. Your hard work deserves fair reward, and that includes every tip you’ve earned.