For those just starting out in the hospitality sector, there can be myriad challenges. Alongside managing daily operations, people management, and finances, there is also the challenge of remaining compliant with new tipping legislation.

The hospitality industry is one of the most dynamic yet challenging sectors to operate in. For new business start-ups, managing daily operations and ensuring legal compliance can often be daunting tasks. One challenge is the effective and transparent management of staff tips and service charges that are spontaneously/voluntarily paid by customers. Here, we list five key points that all new start-ups should consider when setting up a tipping scheme, and explain how Buzzacott Troncmaster Services (“BTS”) can help you.

Legal compliance

On 1st October 2024, the Employment (Allocation of Tips) Act (“The Act”) was enacted in the UK. The new legislation requires business to pass on 100% of all tips and service charges (“tips”) fairly to workers by the end of the month following the month in which it was collected. Employers must ensure they follow all requirements of the legislation, with failure to comply potentially leading to Employment Tribunal claims from workers, where compensation payments of up to £5,000 may be applicable. 

Transparency

The Act is centred around fairness and transparency. The method in which you pass on your tips and service charges must now be clearly stated in a tipping policy, with all workers having sight of this and understanding exactly how the tips are allocated. Allocating tips paid at a place of business to your workers through an external Troncmaster in place, such as BTS, ensures there is transparency when it comes to the allocation of tips, as we will provide you with a tipping policy that is fully compliant with the Act. Workers will be able to contact us any at any point if they have any queries regarding the tronc scheme, ensuring transparency and taking the burden away from you in the process.

Record keeping

The Act requires employers keep a record of every tip received and passed on to workers for three years. A worker can make a request for records of the amount of tips and service charge paid at the place of business and the amount allocated to that worker, once in every 3-month period, so businesses must ensure these records are kept up-to-date and passed on to workers in a timely manner. BTS keep up-to-date records of all tips received and paid out, and can provide these details should you or your workers ever require them.

Fairness

As mentioned previously, fairness is one of the key aspects of The Act. However, it is important to note that allocating and distributing tips “fairly” does not mean allocating the same proportion to all workers. There may be legitimate reasons why an external Troncmaster may allocate varying proportions of the tips to different workers, such as type of role/work, basic pay, hours worked during period when tips were received, individual and/or team performance, seniority/level of responsibility, length of time served with the employer and customer intention. Employers must give due consideration to all the workers involved in providing service to customers, including agency workers, whom are employed by the agency providing the agency workers.

Staff motivation

A key question to ask yourself if whether your tipping practices will motivate your workers. Setting up a de-motivating practice from the outset can detriment your business. 

Businesses can ensure their tipping practices are rewarding workers fairly for their hard work and achievements, by appointing an external Troncmaster. BTS supports a wide range of hospitality businesses in every corner of the country, from bars and restaurants to hotels and casinos.

What are the benefits of an external Troncmaster?

• The arrangement can be genuinely independent, free from employer interference, run for the benefit of staff.

• It can offer significant savings to staff and businesses through exempt National Insurance Contributions.

• Staff can get up to 100% ownership of their hard-earned tips with a say in how they are shared out, which is compliant with the Act.

• Improvement in staff motivation and retention, as workers feel valued and rewarded.

There has never been a better time for new business start-ups to reach out and make use of an external Troncmaster such as BTS – setting you up for success from the get-go. The hospitality industry faces significant challenges due to rising costs, the bounce back from the pandemic, and the ongoing cost of living crisis. At the budget in October, the Government delivered an increase to the annual tax bill of £3.4 billion to hospitality in 2025. The implementation of an external tronc scheme can go some way in limiting the impacts of these challenges.