The Allocation of Tips Act 2024 — what it means for your business

The Employment (Allocation of Tips) Act 2023, which came into force on 1 October 2024, changed the rules around tips and service charges in the UK. If your business collects tips — whether through card payments, service charges, or cash — you now have legal obligations around how they're distributed to workers.

This article explains what the law says, what you must do, and how FlexStaff handles this for workers placed through our platform.

What the Act says

Before October 2024, employers could legally retain card tips or service charges, or distribute them at their discretion. That changed.

Under the Act:

• All qualifying tips must be passed to workers in full. Employers cannot keep any portion of tips or service charges paid by customers.
• Tips must be distributed fairly and transparently. The Act requires a written tips policy and records of how tips are allocated.
• The deadline for distribution is the 10th working day of the month following the month in which the tips were received. Tips collected in April must be distributed by the 10th working day of May.
• Workers have the right to request a record of tip distributions going back up to three years.

The Act covers all workers — employees, workers (including those on zero-hours contracts), and agency workers. If you use flexible or temporary staff, those workers must also receive their share of tips.

What businesses must do

1. Write and publish a tips policy. You must have a written policy that explains how tips are collected and allocated. This must be available to all workers.

2. Allocate tips fairly. The law does not mandate equal distribution, but it must be fair, transparent, and non-discriminatory. Many businesses use a tronc system — an independent third-party distribution scheme operated by a troncmaster — which is still permitted under the Act.

3. Distribute by the 10th working day of the following month. Late distribution is a breach of the Act and can result in an employment tribunal claim.

4. Keep records. Maintain records of how tips were collected and distributed for at least three years.

What happens if you don't comply

Workers can bring a claim to an employment tribunal if:

• Tips are not distributed within the required time frame
• The distribution is unfair or discriminatory
• They are denied access to tip allocation records

Tribunals can award compensation to the worker and order the employer to revise their tips policy. There is no cap on compensation in some circumstances.

Practical note: Even if you use a service charge rather than optional tips, the Act applies if the service charge is "discretionary" — i.e., the customer can refuse it. Mandatory service charges built into pricing are treated differently; seek legal advice if you are unsure which category applies to you.

How FlexStaff handles tips

When you work with FlexStaff, we act as the employer of record for the workers placed at your venue. This means we handle tip distribution in compliance with the Act.

Here's how it works:

1. You report tips — at the end of the month, you tell us the total tips allocated to FlexStaff-placed workers at your venue during that period.
2. We calculate the distribution — we apply your agreed allocation method (equal split or proportional to hours worked).
3. Workers receive 100% of their tips — minus any applicable income tax and National Insurance on the tips amount.
4. Payment is made on the last Friday of the following month — in line with the Act's requirements.

Workers can see their tip allocation on their payslip. You receive a record of distributions for your own compliance records.

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If you're unsure whether your current tips process complies with the Act, we recommend speaking with an employment law specialist. For FlexStaff businesses, our compliance team can walk you through how we handle this on your behalf.