Tronc services
Let us help you manage your tips and service charges efficiently (and save some money too).
Don't get caught out by the new Tips Legislation
Tipping in the hospitality industry has been like the Wild West, with little regulation or even best practice. This all changed when the new Allocation of Tips legislation was passed and came into effect in October 2024.
It laid down rules and requirements to ensure fair and transparent tipping practices and protect employees from unscrupulous employers.
Most employers want to do right by their staff. They understand how important they are, especially in the service sector, and also the struggle to recruit and keep good staff. But despite this good intent, tipping practices were often inefficient, confusing, and actually cost the employer and employee!
In fact, the only one to benefit from this scenario was HMRC.
Tronc solutions
One way of managing tips and service charges is through a tronc scheme.
We know tronc schemes have a strange name, but they have actually been around for a while and are a tax-efficient way of sharing pooled tips amongst staff. The beauty of a tronc scheme is that, when the rules are adhered to, monies gained from discretionary tips and service charges can be paid out through the payroll without attracting either Employers’ (ERs) or Employees’ (EEs) National Insurance.
That means significant cost savings for employers and more money from the tips for employees.
See how the savings stack up:
At current NI rates of 13% for Employers’ NI and 10% for Employees’ NI, the savings can soon add up.
| Value of pooled tips per month | Your team save in Employee NI annually | You save in Employer NI annually |
|---|---|---|
| £10,000 | £9,600 | £16,560 |
| £20,000 | £19,200 | £33,120 |
| £50,000 | £48,000 | £82,800 |
Experts at handling complex payrolls
You might wonder what this has to do with a payroll provider. And yes, you don’t have to pay tips through the payroll, but the way tips are collected has made payment through payroll the easiest option.
With the rise in card and contactless payments over cash, tips and service charges are now landing in business bank accounts, along with the bill payment. The days of the tip jar behind the bar have largely gone.
This causes an issue for the employer, who now has money sitting in their bank account—money that needs to go to their staff. So, they add it to the salary.
The problem is that it is treated like income, so it attracts tax (which it should) and National Insurance (which it shouldn’t). There is also the potential for further problems with VAT, corporation tax, and even pension contributions. It can easily become a compliance nightmare and a source of unnecessary tax (and no one wants that!).
This is where we can help.
- Consultation on the best solution to handle your tips and service charges
- Advice on the best way to set up a compliant tronc scheme
- We can act as your Troncmaster
- Engage with your staff on joining the tronc scheme
- Set up the distribution rules for the tronc scheme
- Allocate the correct distribution of tips, according to the tronc rules, per pay period
- Send a report with allocations so you can add to your payroll (if we do not handle your payroll)
- Alternatively, we can handle your tronc as part of handling your payroll and can make the tronc payments.
Let’s have a chat about how we can transform your payroll
Take a closer look at our dedicated Tips and Troncs service
