New worker consultation rules are coming in 2026. Here’s what
businesses should be checking now.

A lot of businesses spent 2024 getting their tipping policies into shape and reasonably
assumed the big legislative change was behind them.

They’ll need to look at those arrangements again.

The Employment Rights Act 2025 introduces new requirements for businesses to consult
workers when developing or reviewing their tipping policies. Employers will also have to
review those policies at least once every three years and consult workers again each time.
An anonymised summary of the views raised during consultation must be made available to
workers at the relevant place of business.

The Government’s latest implementation timetable says the strengthened tipping law is
expected to take effect by the end of 2026. Meanwhile, a further consultation on the revised
statutory Code of Practice is underway.

At EasyTip, we work with businesses across hospitality and other service industries on direct
tipping, pooled tips and tronc arrangements. One thing those conversations make very clear
is that having a tipping policy and having a tipping system your staff actually understand are
not always the same thing.

That gap is about to become harder to ignore.

What changes in 2026?

The rules introduced in October 2024 established the basics.

Where employers control or significantly influence qualifying tips, those tips must be
allocated fairly between workers. Businesses where qualifying tips are received on more
than an occasional and exceptional basis need a written tipping policy, and eligible agency
workers are protected too.

Fair does not necessarily mean equal.

The existing statutory Code allows businesses to consider factors such as role, hours
worked, responsibility, performance, seniority and customer intention when deciding how
pooled tips should be shared.

The problem starts when those decisions exist somewhere in a policy but the people
receiving the money have little idea how they work in practice.

The next stage of the legislation addresses that much more directly.

Consultation is becoming compulsory.

Until now, the statutory Code has encouraged businesses to consult workers and seek
broad agreement on how tips are allocated.

The Employment Rights Act makes that consultation a legal requirement.

Before producing a written tipping policy, an employer will have to consult recognised trade
union representatives or other worker representatives where they exist. If they don’t, the
workers likely to be affected by the policy must be consulted directly.

The same applies when the policy is reviewed.

Printing a finished policy and asking the team to approve it afterwards is unlikely to satisfy
the intention behind these changes.

The point is to give workers an opportunity to contribute to the way tips are allocated, rather
than simply informing them of the result.

There is a simple way to get a sense of where your business stands now:

If you asked your team how tips are divided, would they all give roughly the same answer?

If one person thinks allocation is based on hours, another thinks it depends on role, and
somebody else has no idea, the first job probably isn’t rewriting the policy.

It is finding out why the existing system is so difficult to explain.

“We have a tronc” does not answer the question.

One thing we see repeatedly is businesses treating the existence of a tronc as the end of the
conversation.

“We have a tronc” can easily become shorthand for “someone else deals with the tips.”

A tronc is a way of managing and distributing pooled tips. It does not automatically make the
underlying arrangement fair, transparent or properly understood by the workforce.

Businesses can appoint an independent troncmaster or use an external tronc operator, and
properly structured troncs remain an important way of managing tip allocation.

But independence is important.

HMRC defines a tronc as a special pay arrangement used to distribute tips, gratuities and
service charges. For payments from a tronc to avoid National Insurance contributions under
the relevant exemption, the employer must not directly or indirectly determine how those tips
are allocated.

That means a business needs to know exactly where its involvement ends.

It also cannot simply stop paying attention. Under the statutory tipping guidance, if an
employer becomes aware that an independent tronc is operating unfairly or improperly, it is
expected to act.

Tipping law and tax law are separate questions.

This is another area where businesses can easily muddle two different sets of rules.

The legislation introduced in October 2024 changed the obligations around the allocation
and distribution of qualifying tips.

It did not change the underlying tax and National Insurance rules.
Income Tax remains due on tips.

National Insurance treatment depends on the circumstances, including who receives the
money and who controls its allocation.

Where tips are distributed through a tronc and the employer does not directly or indirectly
determine how those tips are divided, the payments can meet the conditions for exemption
from National Insurance contributions. If the employer is effectively deciding who receives
what, the position can be different.

Of course a well managed tronc solution, like the one provided by EasyTip, can lead to
substantial savings. Namely 15% NIC exemption on the employer side and 8% for
employees. That’s a lot more money for your business and for your team!

What about digital tips?

This is where the route taken by the money becomes particularly interesting.
A customer using a QR code to tip a worker directly, with the payment bypassing the
employer altogether, is outside the scope of the Tipping Act.

A digital tip received or controlled by the employer can be within scope.

The existing statutory Code is very clear that the method of payment itself — cash, card, QR
code or app — does not determine how the tip is treated. What counts is whether the
employer receives the tip or exercises control or significant influence over its distribution.

So two customers can both scan a QR code and create two quite different tipping
arrangements. One payment might go directly to an individual worker. Another might enter a
pool before being divided between the team.

→ Where did the money go?
→ Who controlled it?
→ Was it pooled?
→ Who decided what happened next?

Digital tipping makes those routes easier to separate and record, but the business still has to
be clear about which structure it is actually operating.

What you should check now.

A good place to start is the policy itself. Here the objective is to see what type of tips
collection your team, your customers and your business would like to have in place. It’s not
one size fits all but luckily a balance can be found thanks to multiple solutions like those
developed by EasyTip.

If the objective is to reward staff but avoid extra charges to the customers, then digital tipping
is probably the right solution. If on the other hand you want a predictable and significant tips
pool then introducing service charge is advisable.

Assuming you want to maximise your NIC savings, then ask yourself if the tips collected
require pooling, management and allocations. If you choose that route, you almost certainly
will require a tronc arrangement. Choosing Individual tips or Team Direct tips could avoid
that.

Get independent advice. If you opt for a tronc solution, seek strong and independent advice. The latter is the most
important litmus test for the NIC exemption.

Keep the lines clear. There should be no grey lines: your troncmaster
must not be in any managerial positions within the business, they should be registered with
HMRC and your relationship with them should be governed by a separate agreement.

And of course, start talking to the staff. Arrange a consultation between your team and the
chosen troncmaster. If your team has suggestions, consider if they can be incorporated into
the tipping policy and track those changes for everyone to see.

At EasyTip we handle all the associated admin, reporting and compliance. So if you have
questions or would like a free consultation on how to improve your tip collection
arrangement, drop us a line and we will be happy to help.

Government implementation dates remain subject to parliamentary processes and may
change. This article is for general information only and should not be treated as legal, tax or
accounting advice.

Sign up now and discover a simpler way to connect tips to your team with EasyTip.