What does the tips law require of cafe owners? Since 1st October 2024, under the Employment (Allocation of Tips) Act 2023, you must pass on 100% of qualifying tips to your workers, allocate them fairly, pay them out by the end of the month after they were received, and (if you take tips more than occasionally) have a written tips policy and keep records your staff can ask to see. It is a legal requirement with tribunal teeth, not a nice-to-have.
What counts as a qualifying tip
Everything the business receives or controls: card tips, service charges, and tips paid through an app, plus cash tips where the employer controls the pooling. The only lawful deductions are tax and National Insurance. Card processing fees cannot be skimmed off the top, and neither can an admin charge for the trouble of distributing.
Fair allocation
Fair does not have to mean equal, but it does have to be justifiable against the statutory Code of Practice. You can weight allocation by role, hours worked, or seniority, as long as the basis is transparent and applied consistently, and it must include everyone at the place of business, agency staff and zero-hours staff included. Front of house versus kitchen splits are allowed if the reasoning is fair and written down. What fails the test is opacity: an allocation nobody can explain, or one that quietly favours whoever does the allocating.
The paperwork
If tips are paid in your cafe more than occasionally (in a cafe, they are), you need a written tips policy available to all staff, saying how tips are collected, allocated and paid out. You must keep records of tips received and allocated for three years, and any worker can make a written request (once per three-month period) to see the tipping record. Distribution deadline: by the end of the month following the month the tip was paid. A tip left on 15th August must reach staff by 30th September.
Troncs
A tronc (an independent arrangement where a troncmaster allocates tips) remains lawful, and using a fairly-run independent tronc counts towards fair allocation. For a small independent cafe a tronc is often more machinery than needed, but if service charges are significant it can also carry National Insurance advantages. Worth a conversation, not a default.
What happens if you get it wrong
A worker can bring a tribunal claim within 12 months, the tribunal can order payment of what should have been allocated (to the whole affected workforce, not just the claimant) and award up to £5,000 compensation per worker for related financial loss. The fix is cheaper: a one-page policy, a spreadsheet, and a monthly payout routine. We can write yours in a week.
Want a hand with this?
Book a free 15-minute call and we will tell you what applies to your situation and what to do first. Ad-hoc advice is £125/hr + VAT, billed in 15-minute increments.
General guidance for UK employers, correct at 22nd July 2026. Not advice on a specific situation. More guides for your sector: HR for cafes and coffee shops. Not sure where your gaps are? Check your HR Risk Score in 3 minutes.
