# Does this payment count as a tip, and who gets it? Five questions for a pub or restaurant

> Five questions on how a tip was paid, who shares it out and when, ending in one of six outcomes with the section of the tips law that applies to each.

- Page to cite: https://aeolookup.com/hospitality/does-this-count-as-a-tip-who-gets-it-pub-restaurant/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Restaurants, pubs and small hotels, Staff, rotas and tips
- Published 2 October 2026
- Key fact: We wrote this questionnaire of 5 questions and 6 outcomes from the rules set out in 2 of our guides and the sources each outcome names. Of the 65 routes through the five questions, 32 end at the deductions outcome, because taking card fees or an admin charge out of tips outranks every other answer. Only cash a worker keeps without a steer from the venue stops after one question.
- Sources: Employment Rights Act 1996, sections 27C and 27I, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips, paragraphs 9 and 10; GOV.UK, Tips at work; all read 2 October 2026.; Employment Rights Act 1996, sections 27C(6), 27D and 27K, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips, paragraph 2; both read 2 October 2026.; Employment Rights Act 1996, sections 27G and 27K, on legislation.gov.uk, read 2 October 2026.; Employment Rights Act 1996, sections 27D, 27G, 27I and 27J, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips, paragraph 18; both read 2 October 2026.; Employment Rights Act 1996, sections 27F, 27G, 27I and 27J, on legislation.gov.uk; HMRC, Guidance on tips, gratuities, service charges and troncs (E24), as set out in our guide; read 2 October 2026.; Employment Rights Act 1996, sections 27C, 27D, 27G, 27H, 27I and 27J, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips (GOV.UK); GOV.UK, Tips at work; all read 2 October 2026.; each outcome names its source, and the linked guide shows the working.

For the owner or manager of a pub, restaurant or cafe who is holding a payment from a customer and needs to know whether the tips law covers it, and what the venue must then do. It asks how the customer paid, how often tips arrive, who decides the split, whether anything comes off and when staff are paid. It gives one outcome with the section of the Employment Rights Act 1996, as amended by the Employment (Allocation of Tips) Act 2023, that applies. We read the Act on legislation.gov.uk and the statutory code of practice on GOV.UK on 2 October 2026. Nothing you choose leaves the page.

**Free tool on the page:** Is it a qualifying tip, and what the venue must do with it. It runs in the browser at https://aeolookup.com/hospitality/does-this-count-as-a-tip-who-gets-it-pub-restaurant/#tool and asks for no sign-up.

## The questions, and why each is asked

**1. How did the customer pay it, and who has the money now?** Section 27C covers any tip, gratuity or service charge however described. The code says the payment method does not decide it; what matters is whether the venue receives the money or controls how it is shared.

**2. How often are tips or service charges paid at this venue?** Sections 27I and 27J require a written policy and three years of records only where qualifying tips are paid more than on an occasional and exceptional basis. The duty to share them fairly applies either way. This question appears only when an earlier answer makes it relevant.

**3. Who decides how much each worker gets?** Under section 27F a venue that hands the allocation to an independent tronc operator, where that is fair, is treated as having allocated the tips fairly itself. The operator must act independently of the employer. This question appears only when an earlier answer makes it relevant.

**4. Does anything come off the tips before staff are paid, other than tax and National Insurance?** Section 27C(6) makes the amount to share the amount the customer actually paid, disregarding any deductions. The code says tips go to workers without deductions except in very limited cases such as income tax. This question appears only when an earlier answer makes it relevant.

**5. When are tips paid in one month paid out to staff?** Section 27G requires allocation and payment no later than the end of the month after the month in which the customer paid. Tips paid in October must reach staff by 30 November. This question appears only when an earlier answer makes it relevant.

## Every outcome, and the rule behind it

### Cash a worker keeps, with no steer from the venue, is outside the tips law

Reached when: "How did the customer pay it, and who has the money now?" answered "Cash handed to a worker, who keeps it or shares it as staff choose".

Under section 27C of the Employment Rights Act 1996 a tip received by a worker becomes a qualifying tip only if the employer receives it later or controls or significantly influences how it is shared. Cash a worker keeps, or shares as staff choose, is outside the duties. It is still income: GOV.UK says the worker reports it to HMRC and pays income tax, with no National Insurance. If the venue would need a written policy were these tips covered, section 27I(5) requires it to tell workers why it has none.

- Do not tell staff how to split the cash or collect it at the end of a shift: the code says either is likely to be control.
- Tell staff in writing that cash they keep is theirs and that they must report it to HMRC.
- If card tips also arrive, run the questions again for those.

Source: Employment Rights Act 1996, sections 27C and 27I, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips, paragraphs 9 and 10; GOV.UK, Tips at work; all read 2 October 2026. The working is in [Do you pay National Insurance on tips? Card tips, service charges and troncs, with one restaurant's year worked](https://aeolookup.com/hospitality/national-insurance-on-tips-service-charge-tronc/).

### Card fees and admin charges cannot come out of tips

Reached when: "Does anything come off the tips before staff are paid, other than tax and National Insurance?" answered "Card fees, an admin charge, breakages or till shortages".

Section 27C(6) of the Employment Rights Act 1996 makes the amount to be shared the actual amount the customer paid, with any deductions disregarded, and section 27D requires the whole of it to be allocated fairly between workers. The statutory code says tips go to workers without deductions except in very limited cases such as income tax. Card processing fees, admin charges, breakages and till shortages are not among them. A worker can complain to an employment tribunal within twelve months of the failure, under section 27K.

- Stop the deduction from this month's allocation and pay the card fee from the venue's own costs.
- Work out what was deducted over the last twelve months and pay it to the workers who were short.
- Change the written policy so it says tips are shared in full, less tax and National Insurance only.

Source: Employment Rights Act 1996, sections 27C(6), 27D and 27K, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips, paragraph 2; both read 2 October 2026. The working is in [The tips law for restaurants and pubs](https://aeolookup.com/hospitality/tips-act-tronc-restaurants-pubs/).

### Tips must reach staff by the end of the month after they were paid

Reached when: "When are tips paid in one month paid out to staff?" answered "Later: quarterly, at reconciliation or when someone asks".

Section 27G of the Employment Rights Act 1996 requires the employer to allocate each qualifying tip, gratuity or service charge, and pay it, no later than the end of the month following the month in which the customer paid. A tip paid on 3 October 2026 must be paid out by 30 November 2026. Quarterly payment, or payment when the service charge account is reconciled, breaks the rule for most of the tips in the quarter. A worker can complain to a tribunal within twelve months of the last late payment.

- Move tips onto the monthly payroll with a one-month lag, so each month's tips are paid in the next month's run.
- Pay any tips already held beyond the deadline in the next payroll.
- Write the payment date into the tipping policy.

Source: Employment Rights Act 1996, sections 27G and 27K, on legislation.gov.uk, read 2 October 2026. The working is in [The tips law for restaurants and pubs](https://aeolookup.com/hospitality/tips-act-tronc-restaurants-pubs/).

### Occasional tips: share and pay them, without the policy and records duty

Reached when: "How often are tips or service charges paid at this venue?" answered "Only now and then, a few times a year".

Where qualifying tips are paid only on an occasional and exceptional basis, sections 27I and 27J of the Employment Rights Act 1996 do not require a written tipping policy or three years of records. The code's example is a clothing shop tipped a few times a year. The other duties still apply: section 27D requires a fair allocation between the workers at the venue, in full, and section 27G payment by the end of the month after the customer paid. A venue that takes card tips most weeks is not in this outcome.

- Share each tip fairly between the workers at the venue and note who received what.
- Pay it no later than the end of the following month.
- Check the frequency again each quarter: once tips arrive most weeks, the policy and records duties start.

Source: Employment Rights Act 1996, sections 27D, 27G, 27I and 27J, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips, paragraph 18; both read 2 October 2026. The working is in [The tips law for restaurants and pubs](https://aeolookup.com/hospitality/tips-act-tronc-restaurants-pubs/).

### An independent tronc meets the allocation duty, but the policy and records stay with you

Reached when: "Who decides how much each worker gets?" answered "A troncmaster the venue does not direct".

Under section 27F of the Employment Rights Act 1996, where it is fair for the employer to have an independent tronc operator allocate the tips, the employer is treated as having allocated them fairly, and the operator pays them. The employer still needs the written policy under section 27I and the records under section 27J, which must show the amount passed to the tronc, kept for three years. HMRC's guidance says no National Insurance is due on tips a troncmaster shares out where the employer does not direct the allocation.

- Confirm the troncmaster decides the split without instruction from the owner or a manager.
- Record each month's total paid into the tronc and keep it for three years from the date the customer paid.
- Check the tronc pays out by the end of the following month, and that it runs its own PAYE scheme.

Source: Employment Rights Act 1996, sections 27F, 27G, 27I and 27J, on legislation.gov.uk; HMRC, Guidance on tips, gratuities, service charges and troncs (E24), as set out in our guide; read 2 October 2026. The working is in [Do you pay National Insurance on tips? Card tips, service charges and troncs, with one restaurant's year worked](https://aeolookup.com/hospitality/national-insurance-on-tips-service-charge-tronc/).

### A qualifying tip the venue shares out: all five duties apply

Reached when: any other set of answers.

Card tips, service charges and cash the venue collects or steers are qualifying tips under section 27C of the Employment Rights Act 1996. Section 27D requires the whole amount to be allocated fairly between workers, agency workers included under section 27H; section 27G requires payment by the end of the month after the customer paid; section 27I a written policy available to all workers; and section 27J a record of every tip kept for three years, which a worker may ask to see. National Insurance is due on tips the employer allocates.

- Write the tipping policy: whether tips are encouraged, how they are shared and how fairness is ensured, and give every worker a copy.
- Keep a monthly record of tips received and each worker's share, for three years from the date the customer paid.
- Include agency workers on the same basis as directly employed staff doing the same work.
- Put tips through payroll with tax and National Insurance, and never use them to make up the minimum wage.

Source: Employment Rights Act 1996, sections 27C, 27D, 27G, 27H, 27I and 27J, on legislation.gov.uk; statutory code of practice on fair and transparent distribution of tips (GOV.UK); GOV.UK, Tips at work; all read 2 October 2026. The working is in [The tips law for restaurants and pubs](https://aeolookup.com/hospitality/tips-act-tronc-restaurants-pubs/).

## How to use the result

Run it once for each way tips arrive at the venue: card tips, the service charge and the cash pot can land in different outcomes. Where the outcome names a breach, put it right for the current month first, then work back through the last twelve months, because that is how far back a worker can complain to a tribunal. Keep a copy of the outcome with the written policy. The government consulted until 29 September 2026 on a revised code that would add a duty to consult workers on the policy; check GOV.UK for its start date.

The outcome applies the rule to the answers given; it cannot see the facts behind them. Where an answer is a judgement, or the facts are unusual, the outcome may not fit. This page is general information, not legal advice.

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) sets up AI assistants for restaurants, pubs and small hotels: they prepare drafts for a person to approve. None of these outcomes depends on them.

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General information for UK small firms, not legal, tax or financial advice.