Protecting your hospitality margins amid the 2026 cost crisis
With one third of the hospitality sector now operating at a loss, managed outsourced payroll and tronc management isn’t just day-to-day administration; it’s a survival strategy. Running a hospitality business right now is not for the faint of heart.
If you feel like your margins are vanishing, you are not alone. A recent survey from UKHospitality and other sector bodies revealed that
- One third of hospitality businesses are currently running at a loss
- Six in ten operators report that they have had to cut jobs
- 63% have reduced staff hours just to try and stay afloat
- 76% have had to increase prices for consumers, which in turn leads to less people being able to afford to eat out, go to the pub or stay at a hotel..
While these issues look bleak for everyone, from business owners and employees through to the customer, they also further complicate your payroll, adding extra stress to an already struggling industry.
SSP and National Living Wage hikes
The pressure driving these losses is largely coming from your payroll costs. As of April 2026, the National Living Wage for workers aged 21 and over has hit £12.71 per hour. The rates for younger workers have also surged, with 18 to 20 year olds now earning £10.85 per hour.
On top of rising wages, changes to Statutory Sick Pay (SSP) are introducing immediate new costs. Employees now receive SSP from their very first day of illness, removing the old three day waiting period. Further to this, the removal of the lower earnings limit means that even your part-time and casual team members, like weekend bar staff or zero-hours waiting staff, now qualify for SSP.
While this is brilliant news for staff wellbeing, it means short-term absences now have an immediate financial impact on employers, requiring even tighter budgeting at a time when they are already seeing reduced customer footfall.
Protecting your margins with a tronc scheme
With industry costs rising and a third of the sector in the red, managing your tips efficiently is essential to reducing costs.
Under the Employment (Allocation of Tips) Act, 100% of tips must go directly to your staff, distributed fairly and transparently with zero business deductions. Because the vast majority of tips are now cashless and land directly in your business bank account, many operators make the costly mistake of simply adding them to standard wages.
Doing this automatically triggers a massive 15% Employer National Insurance Contribution and an 8% Employee NIC.
If your restaurant brings in £20,000 in tips a month, processing them through standard PAYE means you are needlessly handing over £36,000 a year to HMRC in Employer NICs. By using a formal tronc scheme managed by an independent Troncmaster like Ascend Payroll, you legally bypass these National Insurance charges entirely.
For hospitality businesses struggling to stay in profit, a compliant tronc scheme is the single most effective way to offset the 2026 wage hikes, lower your operational overheads, and ensure your staff keep more of their hard-earned money.
The 2027 hospitality payroll overhaul
As a hospitality business, you also need to prepare your payroll for the future. Looking ahead to April 2027, the government is completely overhauling how benefits in kind (BIKs) and taxable employment expenses are reported. All employers will be required to payroll these benefits in realtime.
If you provide your team with perks like staff meals, health insurance, or travel allowance, their taxable value will be added directly to their pay through the payroll. Income tax will be deducted in real-time, effectively spelling the end of the dreaded annual P11D forms.
For the hospitality sector, this is actually a massive administrative win, however it is a change that needs to be accounted for to avoid compliance failures and HMRC fines.
High staff turnover can make P11D reporting incredibly time-consuming. By processing benefits in real time, leavers are dealt with accurately at their time of departure, eliminating the need for messy post-leaving date reporting. However, this means you must ensure your payroll software and internal systems are fully equipped to handle real-time BIK reporting before the 2027 deadline.
If you aren’t prepared for these changes, a managed payroll company like Ascend can help! Read about our customer promise to see why we are the right fit for your payroll.
Why choose Ascend for your managed hospitality payroll?
You do not need a generalist payroll company to navigate this crisis; you need a hospitality expert. At Ascend Payroll, we integrate your complex shift payrolls and independent tronc management under one roof.
We can act as your independent Troncmaster, advising you on fair distribution policies and ensuring total compliance with tipping laws without charging sneaky setup fees.
By partnering with us, you also gain access to our Elementary employee app, giving your employees 24/7 access to their payslips, HR documents, and company communications right on their phones.
Don’t let payroll costs push your business into the red. Let Ascend Payroll protect your margins with a compliant tronc scheme, and ensure your team is paid perfectly every time.
Let’s have a chat about how we can transform your payroll.
