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On 19 August 2026, the Department for Business, Innovation, Science and Trade opened a new public consultation on a revised Code of Practice, governing the fair and transparent distribution of tips. The consultation closes on 29 September 2026, and it builds directly on rules that have applied since October 2024.

For anyone in hospitality, HR, payroll, or employment law, this is a meaningful update worth understanding.

The context

Since October 2024, UK employers have been required to pass on all qualifying tips, gratuities and service charges to workers in full, with no deductions beyond those required by law, such as tax. Businesses that receive tips on more than an occasional basis have also had to maintain a written tipping policy and keep accessible records. Those foundational requirements are not changing.

What is changing stems from the Employment Rights Act 2025, which introduced a new legal duty for employers to consult workers, or their representatives, before creating or revising a tipping policy, and to review that policy at least once every three years. This consultation is the government’s process for turning that legislative change into workable, statutory guidance.

What the draft Code proposes

Several amendments stand out in the draft:

Employers will not be able to relabel a tip as something else to avoid the rules. The Code makes clear that the substance of a payment determines whether it falls within scope, not its description.

New guidance sets out how consultation with workers should be conducted. Notably, the draft states that a simple majority vote should not be treated as the default or preferred method, and that employers should take active steps to hear from minority groups and workers who may be less likely to participate confidently.

Fixed or guaranteed tip allocations for specific workers or roles are discouraged. The rationale given is that locking in a set amount for one group can increase variability, and therefore unfairness, for everyone else.

On data protection, the Code clarifies that employers should not rely on data protection obligations as a reason to withhold tipping records from workers who are entitled to request them.

Employers are encouraged, though not required, to share their tipping policy with customers or display it publicly.

Who this affects

The consultation is directed at a broad range of stakeholders: employers and business owners in tipping-based sectors, workers (including agency workers and those on zero-hours arrangements), trade unions, troncmasters, employment lawyers, and payroll and accountancy professionals. The rules apply in England, Wales and Scotland. Tipping remains a devolved matter in Northern Ireland and is out of scope.

How to respond

The consultation closes at 23:59 on Tuesday 29 September 2026. Responses can be submitted online via the government’s survey, by email to tipping@businessandtrade.gov.uk, or by post to the Wage Policy Team, Employment Rights Directorate, Department for Business, Innovation, Science and Trade. Written responses should reference the relevant paragraph or question number where possible.

What happens next

Following the close of the consultation, the department will review responses and publish a formal government response. Subject to the Secretary of State’s approval and subsequent parliamentary scrutiny, a final revised Code is expected to take effect in late 2026.

This summary is based on publicly available government consultation documents and is intended for general awareness. It does not constitute legal advice. Organisations considering a formal response should refer to the full consultation document and draft Code of Practice on GOV.UK.

A digital tronc platform is software that automates the collection, allocation and payout of pooled tips for hospitality and service businesses, while keeping them compliant with the Employment (Allocation of Tips) Act 2023. Below are the questions operators ask most often when evaluating one.

1. What is a digital tronc platform?

A digital tronc platform is a piece of software that replaces the manual spreadsheet process of running a tronc (the scheme UK employers use to pool and share out tips, gratuities and service charges among staff).

Instead of a manager doing the maths by hand, the platform:

• Pulls tip and service charge data from your POS, card terminal or booking system, or through manual input
• Applies your agreed allocation rules (equal split, points-based, role-weighted, hours-worked, etc.)
• Calculates each worker’s share
• Keeps a digital audit trail of every decision

Some platforms are pure software you self-manage, while others bundle in an independent, HMRC-registered troncmaster who controls the policy on your behalf. The distinction matters for tax treatment and NIC savings.

2. Is using a tronc platform a legal requirement in the UK?

No single platform is mandatory, but fair and transparent tip allocation is. Since the Employment (Allocation of Tips) Act 2023 took effect on 1 October 2024, employers must:

• Pass on 100% of tips, gratuities and discretionary service charges to workers, with no deductions
• Allocate them fairly, as per the business tipping policy
• Have a written tipping policy available to all staff
• Keep tipping records, and hold on to them for three years
• Pay tips out by the end of the month following the month they were received

A digital tronc platform isn’t legally required to meet these duties, but for any business handling tips across more than a handful of staff, it’s the practical way to meet them without drowning in admin. It also gives you an audit trail to stay on top of things.

3. Do digital tronc platforms save money on National Insurance?

Yes, but only if the tronc is genuinely independent of the employer. Tips distributed through a properly constituted tronc, run by an independent troncmaster (not the employer or management), are exempt from employer and employee Class 1 National Insurance contributions. Run tips through ordinary payroll instead, and both sides pay NIC on them as normal.

That’s why the “independence” of the troncmaster is the detail to check carefully when comparing platforms. HMRC has successfully challenged NIC exemptions in the past where the employer was found to be controlling allocation in practice, not just on paper.

4. What’s the difference between a troncmaster and tronc software?

• A troncmaster is the person or third-party legally responsible for deciding how the tronc is allocated. To preserve the NIC exemption, they need to operate independently of the employer.
• Tronc software is the tool used to calculate, record and pay out that allocation. These can often also be HMRC-registered troncmasters.

Some providers offer software only, leaving you to appoint and manage your own troncmaster (in-house or via an accountant). Others combine the software with their own HMRC-registered, independent troncmaster, so you’re outsourcing both the admin and the compliance risk.

5. Is a digital tronc platform the same as a payroll provider?

No. Payroll pays basic wages; a tronc platform (or the troncmaster behind it) decides how pooled tips are split and typically pays them out through a separate, secondary payroll run to preserve the NIC exemption.

What is multi-site tronc automation?

Multi-site tronc automation is the use of software to calculate, distribute, and report on tips and service charges across more than one venue from a single system, rather than running a separate manual tronc for each location. For hospitality groups with two, ten, or fifty sites, automation can replace spreadsheets and per-venue calculations with one dashboard, one set of audit records, and consistent compliance across every location, while still allowing each site to have its own staff, shift patterns, and distribution rules.

What is a Tronc scheme?

A tronc is an independent system for pooling and distributing tips, gratuities, and service charges among staff, separate from the employer’s payroll. It’s run by a troncmaster, who is a person or organisation responsible for deciding how tips are split, who must operate independently of the employer.

When a tronc is set up correctly and registered with HMRC as its own PAYE scheme, tips processed through it are exempt from National Insurance Contributions (NICs) for both the employer and the employee. That’s the core financial incentive behind tronc: it’s a recognised, HMRC-compliant way to handle tips that legally sits outside ordinary wages.

Key features of a compliant tronc:

• The troncmaster must be independent. The employer cannot set, influence, or revise how tips are allocated.
• A written tronc policy must exist, covering eligibility, distribution rules, and payment frequency, and it must be shared with staff.
• Tronc records must be kept separate from payroll records, with documentation retained for at least three years.
• The scheme must be registered with HMRC as an external PAYE scheme to qualify for NIC exemption.

Why multi-site tronc is harder than single-site tronc

Running a tronc for one restaurant is manageable with a spreadsheet. Running the same process across multiple venues, brands, or regions introduces problems that don’t scale well manually:

Inconsistent policies across sites

Without a central system, each venue manager may interpret distribution rules differently, creating fairness and compliance gaps.

Duplicated admin

Every site needs its own hours data, tip totals, point systems, and payout calculations, multiplied by however many locations you run.

Fragmented audit trails

If HMRC or an employment tribunal asks for records, pulling together consistent documentation from ten separate spreadsheets is slow and error-prone.

Staff moving between venues

Multi-site groups often have employees who work shifts across more than one location. Manually tracking their hours and tip entitlement across sites is a common source of mistakes.

The legal framework: Employment (Allocation of Tips) Act 2023

The Employment (Allocation of Tips) Act 2023 changed how UK businesses must handle tips and service charges. It applies equally whether you run one site or fifty. Under the Act:

• Employers must allocate tips fairly, and the process must be transparent to staff.
• Tips must be distributed to staff without deductions (other than income tax), and paid out by the end of the following calendar month.
• Businesses must maintain a written tipping policy and keep records of how tips were allocated.
• Non-compliance can expose an employer to financial liability in tribunal claims.

For multi-site groups, this liability multiplies across every venue and every member of staff, which is why standardising the process — rather than leaving each site to manage tips its own way — matters more as headcount and venue count grow.

Who can be a troncmaster in a multi-site business?

A troncmaster can be an internal team member (often a senior or trusted staff member elected by colleagues) or an external service provider. What matters legally isn’t who they are, but that they act independently of the employer when deciding how tips are split. A centralised or external troncmaster, often supported by automated software, makes it easier to apply one written policy, one audit process, and one compliance standard across every location, while still allowing distribution rules to flex by site, role, or shift pattern.

What tronc automation actually does

Automation doesn’t change the legal requirements of a tronc, it changes how much manual effort it takes to meet them. A dedicated multi-site tronc platform typically handles:

• Automatic calculation of splits based on hours worked, role, shift, department, or a points system, applied consistently across every venue.
• One dashboard across all locations, so operators can switch between sites without maintaining separate spreadsheets or systems.
• Automatic generation of the records the law requires: distribution rules, written policy documentation, and audit trails, rather than compiling them manually before an inspection or dispute.
• Integration with EPOS and rostering systems, so tip totals and hours worked flow into the tronc calculation without manual data entry.
• Direct payouts to staff bank accounts, with a personal dashboard showing employees exactly what they’ve earned and why.

NIC savings across multiple sites

Because tips processed through a properly registered tronc sit outside payroll, they’re exempt from NICs for both employer and employee. For a single site, that’s a meaningful saving. Across a multi-site group processing tips at scale, it compounds quickly, which is why NIC exemption is often the financial trigger for groups to formalise and automate their tronc process rather than continuing with informal cash-splitting or manual payroll splits.

Multi-site tronc management sits at the intersection of employment law, payroll, and staff trust, and manual processes struggle to keep all three consistent once you’re operating more than one venue. Automation doesn’t remove the legal requirement for an independent troncmaster, but it does remove the administrative burden of running separate, inconsistent processes at every site, while making compliance with the Employment (Allocation of Tips) Act 2023 far easier to demonstrate if it’s ever questioned.

Choosing tronc and service charge management software that integrates with your EPOS system requires asking the right questions up front. Get it wrong, and you’re stuck with a platform that creates more admin than it removes. Get it right, and service charge processing runs in the background while you focus on running your venue.

JustTip automates service charge collection, allocation, and distribution with direct EPOS integration, so operators can stay compliant without Sunday spreadsheets. This article breaks down the seven questions that separate a solution that fits your operation from one that doesn’t.

Key Takeaways: Service Charge Software and EPOS

• EPOS integration should capture service charge data automatically at the point of sale, eliminating manual data entry and reconciliation errors.
• Compliance with The Employment (Allocation of Tips) Act 2023 requires written policies, transparent allocation, and audit-ready records kept for three years.
• JustTip connects directly with major EPOS systems to automate the full service charge journey from collection to staff bank accounts.
• Custom split configurations should match how your team actually works, whether by role, shift, hours, department, or points.

Questions Restaurant Operators Should Ask About Service Charge Software

1. Does the Software Integrate Directly With My EPOS System?

Your EPOS system already captures every service charge transaction. The question is whether that data flows automatically into your service charge management platform or requires manual re-entry. Direct integration means service charge amounts sync in real time. No spreadsheets, no transcription errors, no end-of-week data hunts. Look for platforms that connect with your specific EPOS provider, whether that’s Lightspeed, Square, or SumUp.

2. How Does the Platform Handle Compliance With UK Tipping Legislation?

The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024. It requires employers to pass 100% of qualifying tips to workers without deductions, maintain a written tipping policy, and keep records for three years. It is important that the software makes it easy for business and staff to access your written tipping policy, stores allocation records in an audit-ready format, and supports information requests from staff within the required four-week response window. Platforms that make you cobble this together manually add compliance risks.

3. Does the System Keep Service Charges Separate From Payroll?

When service charges run through your payroll, they become liable for employer National Insurance Contributions. That’s a cost that comes straight off your margin. A properly structured tronc scheme with an HMRC-registered troncmaster keeps service charges separate. The result: no employer NICs on tips, and your team keeps more of what they earn because employee NICs don’t apply either. According to HMRC guidance on tips and troncs, payments made from a tronc where the employer doesn’t allocate the tips are exempt from National Insurance contributions.

4. Can I Configure Custom Tip Splits That Match My Operation?

Every venue runs differently. Some split by role, others by hours worked, and multi-site groups often need department-level rules that vary by location. Generic platforms force you into templates. Ask whether the software supports splits by role, shift, points, department, days, or weeks, and whether you can combine multiple factors. The answer tells you whether the platform adapts to your operation or forces your operation to adapt to the platform.

5. What Reporting and Audit Trail Does the System Generate?

The law requires records of qualifying tips received and how they were allocated for a minimum of three years. Workers can request records about their allocation, and you have four weeks to respond. A solid external tronc and service charge software will provide you with transaction history and a reporting dashboard. Can you export allocation data for your accountant or auditor? Can individual staff members view their own tip records through an employee portal? Reporting that requires manual assembly defeats the point of automation.

6. How Are Staff Payments Processed and How Quickly Do Tips Reach Them?

The Act requires tips to reach workers no later than the end of the month following receipt. For example, a service charge collected on 15 June must be in the worker’s account by 31 July at the latest. Some platforms hold funds longer than necessary. Ask about payment frequency and whether tips go directly to staff bank accounts or require additional processing steps. Weekly payouts on a consistent schedule build trust with your team.

7. What Happens When My Team Structure Changes?

Hospitality staffing shifts constantly. Seasonal staff come on, team members change roles, and split rules need updating. Ask how the platform handles staff changes and multi-site management. Can you add or remove team members without rebuilding your entire split configuration? Does the system integrate with your rostering software, like Timepoint or Fourth? Systems that require manual reconfiguration every time someone joins or leaves create ongoing admin overhead.

How to Choose the Right Service Charge Software for Your Restaurant

The right platform answers these seven questions with confidence. EPOS integration should be direct and automatic. Compliance features should generate policies, maintain records, and handle staff requests without manual intervention.

JustTip handles the complexity of service charge management so you can focus on running your restaurant. Split by role, shift, department, hours, or points. Stay compliant with UK legislation. Give your team transparency and weekly payouts directly to their bank accounts.

Book a free tronc audit to see how JustTip fits your operation.

FAQs about Service Charge Software and EPOS

What is a tronc and service charge management software?

Service charge management software automates the collection, allocation, and distribution of service charges to staff. These platforms integrate with your EPOS system to capture transactions, apply your split rules, and pay staff directly without manual processing.

Why does EPOS integration matter for service charge management?

Direct EPOS integration eliminates manual data entry and reduces errors. Your service charge data flows automatically from the point of sale to your management platform, saving hours of reconciliation work each week.

What is the Employment (Allocation of Tips) Act 2023?

This UK law requires employers to pass 100% of qualifying tips to workers, allocate them fairly, maintain a written policy, and keep records for three years. It came into force on 1 October 2024 and applies across England, Scotland, and Wales.

How do tronc schemes help with NIC savings?

An HMRC-registered tronc with an independent troncmaster keeps tips separate from your payroll. Because the employer doesn’t allocate the tips, they’re exempt from employer NICs. Your team also avoids employee NICs, so everyone keeps more.

How quickly must tips be paid to workers under UK law?

The Employment (Allocation of Tips) Act 2023 requires tips to reach workers by the end of the month following receipt. For example, a service charge collected in June must be paid by 31 July at the latest.

A tronc is a pay arrangement used in UK hospitality to pool tips, gratuities and service charges and share them out among staff. The funds are kept separate from regular wages and are handled by an independent troncmaster, who decides how the money is allocated, operates PAYE on the payments and keeps the records. Run properly, a tronc is exempt from National Insurance, although income tax still applies. 

The Employment (Allocation of Tips) Act 2023 changed the rules for everyone running a tronc in England, Scotland and Wales when it came into force on 1 October 2024, and many operators are still catching up. This guide covers what a tronc is, how it works, the legal duties since the 2024 changes, and the mistakes that quietly cost operators their NI exemption. 

Why the tronc should sit with an independent payer 

There is a second, growing reason to keep tronc money at arm’s length from the business, and it comes from holiday pay. In Palanki v The Big Table Group Ltd, an Employment Tribunal held that tips distributed through a tronc run in-house, with the service charge paid into the employer’s own bank account and distributed to staff alongside their wages were “payable by the employer” under section 224 of the Employment Rights Act 1996, and therefore had to be included in the worker’s holiday pay. The tribunal’s reasoning was that where the employer owns and controls the tronc money, that money forms part of normal remuneration and cannot be stripped out of the holiday pay calculation. 

Palanki is a first-instance decision, so it does not bind other tribunals, and The Big Table Group has appealed it to the Employment Appeal Tribunal. But the direction of travel is clear: the more the tronc looks like the employer’s own money, the harder it is to keep it out of holiday pay, and the larger the potential back-pay exposure. The practical protection is to have the tronc paid by a genuinely independent operator with its own PAYE scheme, so the tips are not “payable by the employer” in the first place. That is how JustTip is structured. JustTip acts as the HMRC-registered troncmaster and pays staff through its own PAYE scheme, keeping the tronc legally distinct from the employer’s payroll for both tax and holiday-pay purposes. 

How a tronc works in practice 

A working tronc has four moving parts. 

The pool: tips, gratuities and service charges flow into a shared fund, often made up of both cash and card tips. 

The troncmaster: an appointed person or external party runs the pool. They set the allocation rules, apply them every payout period, and operate PAYE to deduct income tax on the payments. 

How PAYE is handled: income tax is always due on tips. Where the troncmaster pays staff directly, HMRC opens a separate tronc PAYE scheme in the troncmaster’s name, run separately from the employer’s main scheme. This is not a universal legal requirement for every tronc, but it is how JustTip operates, and, as the Palanki case shows, using an independent scheme also helps keep tronc money out of holiday pay. 

The payment to staff: workers receive their tronc share as a payment separate from their hourly wages. 

The point of the structure is that the person deciding who gets what is independent of the employer. That independence is what protects the National Insurance exemption. 

The role of the troncmaster 

The troncmaster is the heart of any compliant tronc. HMRC’s test is about independence: the person or party allocating the money must be independent of the employer. If that independence breaks, the NI exemption breaks with it. 

Who can be a troncmaster: a staff member with no hiring or firing authority, or an external third party. Putting the business owner, a director, or a manager with hiring or disciplinary authority in the role will normally defeat that independence and lose the exemption, so it should be avoided. 

What the troncmaster does: sets the allocation criteria; applies them each payout period; operates the tronc PAYE scheme and submits real-time information to HMRC where they are the payer; keeps records of what came in and went out; and communicates the policy and handles disputes. Once money is in the pool, the employer should have no say over who gets what. 

Tronc and tax 

Why tronc is exempt from National Insurance 

The NI exemption sits in the Social Security (Contributions) Regulations 2001, Schedule 3, Part 10. There are two conditions, and meeting either one secures the exemption: the tips are not paid to the employee by the employer, directly or indirectly; or the tips are not allocated to the employee by the employer, directly or indirectly. In practice most troncs rely on the second condition, because an independent troncmaster, not the employer, decides who gets what. 

This is why the mechanics of payment do not decide the NI question. Even if tips are paid out through the employer’s payroll, they remain exempt from NI as long as an independent troncmaster, not the employer, decides the allocation. What breaks the exemption is the employer deciding who gets what, whether directly or by controlling the tronc behind the scenes. 

Income tax still applies 

There is no tronc exemption from income tax; all tips are earnings. The troncmaster operates PAYE and deducts income tax before staff receive their share. HMRC’s main practitioner reference is the E24 booklet, “Tips, gratuities, service charges and troncs”, on GOV.UK. 

What changed on 1 October 2024 

The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024, alongside its statutory Code of Practice on Fair and Transparent Distribution of Tips. The Act applies in England, Scotland and Wales; Northern Ireland is excluded. The core duties are: 

• 100% of tips to workers: employers cannot retain any portion of qualifying tips, gratuities or service charges. 

• Fair and transparent allocation: tips must be allocated fairly on the Code’s factors, including role, hours worked, individual or team performance, seniority, length of service and customer intention. 

• Written tipping policy: any business receiving qualifying tips must have a written policy and make it available to all workers. 

• Record-keeping: employers must keep records of how qualifying tips were distributed for three years, and workers can request information about how the policy applies to them. 

• No deductions: tips cannot be reduced by card-processing fees, breakages or administrative charges. The only permitted deductions are statutory ones, such as income tax. 

Enforcement is through the employment tribunal, and tribunals must take the Code into account when assessing fairness. Compensation is capped per worker and uprated each April; the cap is £5,366 from 6 April 2026. 

Common tronc mistakes 

• The owner or a manager is really the one allocating: HMRC treats this as employer allocation, and the NI exemption is lost. 

• No written tipping policy: a breach of the Act for any business receiving tips. 

• Running tronc money as the employer’s own money: as Palanki shows, this risks the tronc being pulled into holiday pay. Keeping the tronc with an independent payer and its own PAYE scheme is the cleaner position. 

• Deductions from the pool: card-processing fees, breakages and admin charges have been banned under the Act since October 2024. 

• Records that don’t add up: spreadsheet audit trails are routinely incomplete, overwritten or late, and will not stand up if HMRC or a tribunal asks for three years of distribution data. 

Frequently asked questions 

Can the business owner be the troncmaster? Best avoided. An owner, director or manager with authority over staff will normally break the independence the exemption depends on, and lose it. 

Are tronc payments taxable? Yes for income tax. They are exempt from National Insurance only where the tronc is set up and run with genuinely independent allocation. 

Does a tronc need its own PAYE scheme registered with HMRC? Not as a universal legal requirement. Where the troncmaster pays staff directly, the employer notifies HMRC and a separate tronc PAYE scheme is opened in the troncmaster’s name. Beyond the tax mechanics, an independent scheme is also the safest way to keep tronc money out of holiday pay following Palanki. This is how JustTip operates. 

How are tips allocated in a tronc? By the troncmaster, on the Code’s fair factors, written down and applied consistently. 

Can the employer deduct card-processing fees from the tip pool? No. Since 1 October 2024, deductions from qualifying tips have been prohibited under the Employment (Allocation of Tips) Act 2023. 

Next steps 

JustTip helps UK hospitality operators run compliant troncs without the spreadsheet pain. As the UK’s HMRC-registered independent troncmaster, JustTip sets and applies the allocation rules, builds the audit trail automatically, runs the tronc PAYE scheme, and keeps the tronc distinct from your payroll for both National Insurance and holiday-pay purposes. Book a demo to see it in action. 

Youth unemployment has been a persistent challenge in the UK. The government’s answer is a multi-layered package called the Youth Guarantee combining direct financial incentives for employers, fully subsidised jobs for the hardest-to-reach young people, and expanded support in every jobcentre across Great Britain. From 30 June 2026, businesses can claim £3,000 for every eligible young person they hire. It’s part of the most ambitious youth employment package in years, and it comes with serious private sector backing.

What is the Youth Jobs Grant?

The Youth Jobs Grant is a straightforward financial incentive. Hire someone aged 18 to 24 who has been on Universal Credit and looking for work for at least six months, and the government pays you £3,000 split across two instalments once the employment is verified by DWP. The first payment of £1,800 arrives at week six of employment, and a second payment of £1,200 follows at week 18. Verification takes place within 10 working days. The application process is straightforward: employers complete a short online form, accept a brief set of terms and conditions, and the eligible young person is identified through a jobcentre.

Young people with health conditions and disabilities are also eligible for the scheme.

The Jobs Guarantee

For young people who have been out of work for 18 months or more, the government is offering something more substantial: a fully funded six-month job. Under the Jobs Guarantee, the government covers 100% of employment costs for up to 25 hours a week at the relevant minimum wage. Participants also receive wraparound support, including pre-employment training in both role-specific and soft skills like confident speaking and time management. The scheme launched as a pilot in April 2026 across six areas: Birmingham and Solihull, the East Midlands, Greater Manchester, Hertfordshire and Essex, Central and East Scotland, and Southwest and Southeast Wales.

Every jobcentre in Great Britain began delivering expanded support for young people from 29 June 2026. At week two, young people receive an Employment and Skills Review with a sharper focus on identifying their skills, followed by weekly appointments to address barriers to work. At week 13, anyone not yet earning or learning receives an in-depth Youth Guarantee Gateway meeting. That triggers four further weeks of intensive help, during which several tailored options are offered : a job, work experience, an apprenticeship, sector-based training, or further learning.

Nearly one million young people are expected to receive this support over the next three years.

Who’s already backing it?

One of the most visible early commitments comes from Merlin Entertainments, the group behind Alton Towers, LEGOLAND Windsor, Chessington World of Adventures and SEA LIFE Aquarium, which has pledged 300 jobs for young people across its UK portfolio over the next three years. Roles will span hospitality, guest experience, technology and marketing, with apprenticeship routes also opening through Merlin’s Engineering Academy. UKHospitality has convened businesses to explore job fairs, apprenticeships and delivery partnerships.

What business groups are saying

Reaction from the business community has been broadly positive. The Federation of Small Businesses noted that nearly half of small employers say financial incentives would encourage them to hire an unemployed person, suggesting the grant could have particular reach among SMEs. The CBI called it “an important part of the puzzle.” The British Chambers of Commerce described it as “an important first step” on youth employment. Youth Employment UK welcomed the measures but noted that lasting impact depends on the quality of the opportunity, the support around the young person, and a genuine commitment to helping them progress, not just the financial incentive alone.

The bigger picture

The Youth Jobs Grant and Jobs Guarantee sit within a £2.5 billion package the government is calling the Youth Guarantee, a commitment to ensure every young person has a clear path into learning or earning. The package aims to help up to 60,000 people aged 18 to 24 take their first steps into work over the next three years. Whether it reaches that target will depend heavily on employer take-up, particularly among small and medium-sized businesses, which make up the vast majority of UK employers and have historically been harder to reach with government-backed employment programmes.

Employers can apply for the Youth Jobs Grant from 30 June 2026 at business.gov.uk.

The Employment (Allocation of Tips) Act 2023 is the UK law that requires employers in hospitality and similar industries to pass 100% of qualifying tips, gratuities, and service charges to workers, to allocate them fairly, and to maintain a written tipping policy. It came into force on 1 October 2024 across England, Scotland, and Wales (Northern Ireland is excluded).  

This guide is the comprehensive employer reference. It covers who the Act applies to, what counts as a qualifying tip, the six core duties, the tribunal mechanics, and the most common ways operators get caught out. 

Who the Act applies to 

The Act applies to any employer in England, Scotland, or Wales where workers receive tips, gratuities, or service charges in connection with their employment. There’s no exemption for small businesses, no minimum number of staff, and no minimum amount of tips. If your business receives qualifying tips, you’re in scope. 

Workers covered include employees and most agency workers. The Act applies regardless of role: front of house, kitchen, support staff, and casual workers are all in scope where they’re working at a place of business that receives qualifying tips. 

What counts as a qualifying tip 

A qualifying tip is one that is paid by a customer in connection with a service and comes into the employer’s possession or control. In practice that covers: 

• Card tips and gratuities processed through the venue’s payment system 

• Service charges (discretionary or mandatory) added to bills 

• Tips paid into a venue-controlled cash Tronc or pool 

• Online tipping and digital tips routed through the business 

What’s not covered: 

• Cash tips paid directly from a customer to a worker that never enter the employer’s possession or control 

• Tips paid to self-employed workers in their own right (subject to other rules) 

If the business has any control or significant influence over the tip, including pooling it, allocating it, or holding it temporarily before distribution, it’s a qualifying tip and the Act applies. 

The six core duties on employers 

1. Pass 100% of qualifying tips to workers 

No deductions other than statutory ones (income tax). Card-processing fees, breakages, administrative charges, and any other employer-side deduction are prohibited. 

2. Allocate fairly and transparently 

Allocation must be fair between workers. The statutory Code of Practice on Fair and Transparent Distribution of Tips, which came into force on the same day as the Act, sets out the factors an employer can legitimately use: 

• Type of role and work performed 

• Basic pay and how workers are engaged 

• Hours worked during the relevant period 

• Individual or team performance 

• Seniority or level of responsibility 

• Length of service 

• Customer intention (where it can be identified) 

3. Maintain a written tipping policy 

Required for any business where qualifying tips are received on more than an occasional and exceptional basis. The policy must be made available to all workers and must cover: whether the employer requires or encourages tipping, how tips are accepted, how they’re allocated, and the principles the allocation rests on. 

4. Keep records for three years 

Records of qualifying tips received and how they were allocated must be kept for three years from the date the tip was received. Records must be sufficient for a worker to verify their own allocation. 

5. Respond to worker information requests 

Workers can request relevant records about how the tipping policy has been applied to them. The employer must respond within four weeks. Each worker is limited to no more than three requests in any 12-month period. 

6. Pay tips no later than the end of the month after receipt 

Qualifying tips must be paid to the worker no later than the end of the month following the month of receipt. A tip received on 15 June must reach the worker by 31 July at the latest. 

Both rules apply at the same time. Tips give workers extra legal protection without reducing the wage floor they’re entitled to. 

Tribunal claims and remedies 

Enforcement is through the employment tribunal. Workers can bring two types of claim: 

Allocation and payment claims. For breaches of the duty to pass on or fairly allocate qualifying tips. Time limit: 12 months from the date of failure, or the date of the latest failure in a series of failures. 

Written policy claims. For breaches of the duty to maintain a written tipping policy or to make records available. Time limit: 3 months from the date of failure. 

Available remedies: 

• A public declaration of non-compliance 

• An order requiring the employer to revise its allocation or comply with the written policy duty 

• An order requiring payment of tips properly due to the worker 

• Compensation of up to £5,000 per worker for financial loss 

• Tribunals can extend compensation to other workers at the same place of business who didn’t bring claims themselves 

A tribunal must take account of the statutory Code of Practice when assessing whether an employer has acted fairly. Failure to follow the Code is not by itself proof of unfair conduct, but it weighs against the employer. 

Common breaches and how to avoid them 

No written tipping policy. The fix is straightforward. Use a template aligned with the Code of Practice, get it approved by your legal advisor, and make it available to all workers. 

Allocation decisions sit with the owner or a manager with hiring authority. A Tronc is the cleanest fix. The troncmaster must be independent. 

Card-processing fees deducted from the pool. Banned since 1 October 2024. Absorb processing fees in the business’s operating costs, not in tips. 

Records kept in unverified spreadsheets. Three years of distribution data is the minimum. Spreadsheets get lost, overwritten, or filled with errors. A Tronc software audit trail handles this automatically. 

Tips used to bridge to National Minimum Wage. Always a breach. Base wage must independently meet NMW for the worker’s age. 

Late tip payments. Tips received in any month must reach workers by the end of the following month. Running this monthly with proper payroll integration keeps you compliant. 

How to comply, in order 

1. Decide whether to operate a Tronc (recommended for the National Insurance exemption and clean allocation independence) 

1. Appoint a troncmaster who is independent of the employer (not an owner, director, or anyone with hiring authority) 

1. Draft a written tipping policy covering acceptance, allocation factors, frequency of payment, and worker rights 

1. Make the policy available to all workers 

1. Register the Tronc PAYE scheme with HMRC if you’re using a Tronc 

1. Set up records that capture every qualifying tip received and how it was allocated, with a three-year retention 

1. Pay qualifying tips by the end of the month following receipt 

1. Respond to worker information requests within four weeks 

1. Review the policy annually, or sooner if your team or operating model changes 

Frequently Asked Questions 

When did the Allocation of Tips Act come into force? 

1 October 2024. The Act received Royal Assent on 2 May 2023, and the commencement date was confirmed by regulations made in 2024. 

What happens if I don’t have a written tipping policy? 

Workers can bring a tribunal claim within three months. The tribunal can order you to put one in place and award compensation up to £5,000 per worker for financial loss. 

Can I deduct card-processing fees from the tip pool? 

No. Card-processing fees, breakages, and administrative deductions are prohibited. Statutory deductions (income tax, NI where applicable) are the only permitted ones. 

How are agency workers treated? 

Most agency workers are covered when they work at the venue receiving qualifying tips. They have the same right to a fair share of the pool as direct employees performing comparable work. 

How quickly must tips be paid to workers? 

No later than the end of the month following the month of receipt. A tip received on 10 March must reach the worker by 30 April. 

Read next 

For when the Act came into force and what employers needed to have ready by then, see the Allocation of Tips Act start date guide. For a structured check against the Act’s requirements, see the UK Tipping Act compliance checklist. For the HMRC-side tax and PAYE rules that run alongside the Act, see the HMRC tips and gratuities checklist. 

For the distribution mechanism most operators use to comply, see the Tronc Explained pillar. For the customer-facing side of service charges, see Service Charge vs Tips. 

Running a UK hospitality Tronc in Excel exposes the business to several risks: HMRC’s challenge to the NI exemption, audit-trail gaps, GDPR breach risk on staff data, manual error in allocation, breakdown of troncmaster independence, missed Tipping Act records, and the loss of historical data when staff leave. None of these risks are hypothetical. Tribunals and HMRC have been actively reviewing Tronc arrangements since the Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024, and spreadsheet-based Troncs are the most exposed. 

This article walks through each risk, the practical impact, and how to fix it. 

1. HMRC’s challenge to the NI exemption 

This is the biggest single risk. The Tronc National Insurance exemption sits in the Social Security (Contributions) Regulations 2001, Schedule 3, Part 10, and is conditional on the troncmaster being genuinely independent of the employer. HMRC tests independence by reviewing the records: who decided allocation, who signed it off, who made adjustments when issues came up. 

Why Excel makes this worse: spreadsheets are easy to edit. If the allocation rules in the Excel file were changed by an owner or manager between pay periods, the change is invisible after the fact. There’s no version history that HMRC can rely on. From HMRC’s perspective, that’s evidence the employer was influencing allocation. 

Consequence: loss of the NI exemption, often retrospectively. Back NI on every tronc payment for as far back as HMRC chooses to look.  

Fix: Use a system that keeps an immutable audit trail of allocation rules and changes. Tronc software does this by default. 

2. Audit-trail gaps 

The Tipping Act requires three years of distribution records, and workers have the right to request records about how the policy has been applied to them. Excel-based troncs routinely struggle to produce three years of clean records on demand. 

Why Excel makes this worse: files get overwritten, lost, or stored on a former employee’s laptop. Version control is informal. Records that exist may not match the records the worker remembers receiving. 

Consequence: tribunal claims under the Tipping Act, with compensation of up to £5,000 per worker. The compensation can extend to other workers at the same venue who didn’t bring claims if they have been affected. 

Fix: a system that captures every distribution, every adjustment, and every policy change automatically, with three-year retention built in. 

3. GDPR risk on staff data 

Tronc records contain personal data: names, hours, pay, sometimes performance metrics. GDPR requires that personal data be processed securely, with controlled access, retention limits, and the ability to fulfil subject access requests. 

Why Excel makes this worse: spreadsheets sit in inboxes, shared folders, and personal laptops. Access is rarely controlled. When a staff member leaves, copies of historical pay data may go with them. Subject access requests are slow to fulfil. 

Consequence: ICO investigation if a complaint is raised. Fines for serious breaches. Reputational damage. 

Fix: centralised system with role-based access, defined retention, and the ability to produce a worker’s own records on request. 

4. Manual error in allocation 

Spreadsheets can often be prone to human error. Tronc allocation involves multiplications, conditional logic, role weightings, and edge cases that compound the risk. 

Why Excel makes this worse: formulas reference cells that get moved. Columns get inserted that break the sums. Copy-paste introduces hard-coded numbers where formulas used to be. Errors can compound across pay periods. 

Consequence: workers are underpaid or overpaid. When workers spot the issue, the business has to investigate and correct, often for multiple pay periods. If errors are systematic, tribunal claims follow. 

5. Troncmaster independence breakdown 

The NI exemption depends on the troncmaster, not the employer, making allocation decisions. In a typical Excel-based Tronc, the manager or owner often ends up adjusting the file directly. Sometimes that’s deliberate. More often it’s a Friday afternoon shortcut. 

Why Excel makes this worse: the file is editable. There’s no system enforcing the role boundary. If the manager changes the numbers, the change happens silently. 

Consequence: Your NI exemption is at risk. 

Fix: a system where the troncmaster has a defined role and the employer cannot allocate. Software-enforced independence is the cleanest defence. 

6. Missed Tipping Act records 

Beyond allocation records, the Act requires evidence that the written tipping policy was followed, that workers received their share by the end of the month following receipt, and that any worker information requests were responded to within four weeks. 

Why Excel makes this worse: these are operational records that aren’t naturally captured in a spreadsheet. Tracking who asked for what, when, and how the business responded usually lives in email or doesn’t exist. 

Consequence: policy-side claims under the Tipping Act with a 3-month time limit. Same compensation cap as allocation claims. 

Fix: a system that records worker requests, response times, and policy updates alongside the allocation data. 

7. Loss of historical data when staff leave 

Troncmaster turnover is the classic disaster scenario. The person running the spreadsheet leaves. The files are on their laptop. The handover is rushed. Six months later HMRC or a worker asks a question about a distribution that nobody can reconstruct. 

Why Excel makes this worse: spreadsheets are personal artefacts in a way that database records aren’t. They live with the person, not the business. 

Consequence: compliance failure on records, potential tribunal claim, HMRC inspection difficulties. 

Fix: system records owned by the business, not the troncmaster. The data survives staff changes. 

The compounding effect 

Each of the risks is individually serious. Together they make Excel-based troncs an increasingly fragile structure for any operator processing more than occasional tips. The Tipping Act has raised the stakes, tribunals are now actively hearing claims, and HMRC is reviewing arrangements with sharper attention than it did pre-2024. 

The argument for Excel was always cost and simplicity. Both are illusory once a worker brings a tribunal claim or HMRC asks for three years of records. Dedicated Tronc software with built-in audit trail, role separation, and policy management costs less than the average penalty under the Tipping Act, and the records build themselves. 

Frequently Asked Questions 

Is it illegal to run a tronc in Excel? 

No. There’s no rule that says a tronc has to use software. The risks above are about compliance and operational quality, not about the spreadsheet itself. 

Can I keep using Excel if my business is small? 

Possibly, but the risks scale with team size and tip volume. Above 10 staff or £50,000 of card tips a year, the case for moving to dedicated software gets strong. 

Will HMRC always remove my NI exemption if my tronc is in Excel? 

Not automatically. HMRC removes the exemption when it finds evidence of employer influence on allocation. A well-disciplined Excel tronc with a genuinely independent troncmaster can pass scrutiny. The problem is that discipline rarely holds across years of pay cycles. 

The discussion around tips in UK hospitality has been escalating in recent years, especially with legal changes reshaping the framework around how tips are handled. The Employment (Allocation of Tips) Act 2023 came in two years ago, formalising legal requirements for handling tips and gratuities. There is still a lot of confusion surrounding tips and service charges, especially when it comes to tax on tips.

So, are tips taxable income in the UK? In short, yes, but the way they are taxed depends on how tips are processed through the business. Here is why:

PAYE

Tips and gratuities are always liable to PAYE (income tax). This doesn’t change, even if your business uses a Tronc system. The Tronc system that your business uses should be registered with HMRC as an external PAYE scheme, and will deduct PAYE on these amounts on your behalf.

If your employer pays your tips and service charges through payroll as wages or salary, they will deduct these amounts on your behalf. In the case of cash-in-hand tips, it becomes your responsibility to declare these amounts to the HMRC. See our guide here.

NICs

Whether or not tips and service charges are liable to NICs depends on whether or not your business/the business you work for uses a Tronc system or not.

Without a Tronc

If your business is not using a registered Tronc system, and pays your tips and gratuities as part of payroll, both you and your employer are liable for tips on these amounts. This is an NIC rate of 8%. They will be taxed as part of your regular payroll, which should be seen on your payslip when you receive it.

With a Tronc

If your business uses a registered Tronc system, you are exempt from paying NICs on tips and gratuities under HMRC regulations. This saves you 8% on every tip amount. However it is important to note that even with a Tronc system in place, these amounts are still liable to PAYE. A Troncmaster will detail all of this on your separate Tronc payslip.