The Employment (Allocation of Tips) Act 2023 is now in force, reshaping how UK hospitality businesses handle tips. The aim is simple: ensuring staff receive 100% of the tips they earn. However, the reality can feel confusing. Many operators are still falling into common traps, which could lead to hefty financial penalties further down the line. Here are the five biggest mistakes that business owners are making with the Employment (Allocation of Tips) Act, and how to avoid them.
1. No Written Tip Policy
The law requires every business to have a clear, written policy on how tips are allocated. This must include how tips are collected (cash, card, or both?), how they are distributed, and why. For instance, some businesses split tips by hours worked, or by seniority. This must all be in your written policy, which must be readily available and accessible for all staff.
2. Unfair Distribution
Leaving tip allocation to a manager’s discretion is no longer acceptable. The system must be transparent and demonstrably fair. This means there cannot be any preference or bias when it comes to tip allocation. A Tronc arrangement, managed independently, can make this easier.
3. Overlooking Back-of-House Staff
Tips aren’t just for servers, and the new tipping act outlines this further. Kitchen teams, baristas, delivery drivers, and cleaners may all be eligible. Excluding them can cause disputes and undermine morale.
4. Poor Record-Keeping
Businesses must keep detailed tip records of how tips have been collected and distributed for three years. This must include end-to-end transaction reports for all tips and gratuities left. Failing to do so can lead to fines and claims by employees. Digital systems simplify this by automatically tracking payments and allocations, and generating your reports for you.
5. Ignoring Technology
Trying to manage tip allocation manually is time-consuming and error-prone. Modern platforms like JustTip streamline distribution, ensure compliance, and give staff real-time visibility.
Final Thoughts
The new law is designed to protect staff and promote fairness. By avoiding these five mistakes, employers can stay compliant, improve transparency, and strengthen trust with their teams.
Check your tipping policy today and if you’d like stress-free compliance with happy staff, talk to JustTip about a smarter way to manage tips. For more information about the Allocation of Tips act, click here.
