Frequently Asked Questions
We’ve compiled most common questions we get asked about tronc schemes
About Troncs
A: A tronc is a tax efficient way of fairly distributing pooled tips, service charges and gratuities to employees in the hospitality sector.
A: A tronc is a tax efficient way of fairly distributing pooled tips, service charges and gratuities to employees in the hospitality sector.
A: A tronc is for discretionary tips, service charges and gratuities (no matter what they are called). It cannot include monies gathered on compulsory service charges. Even if the service charge is added to the bill, if the customer has the option to not pay, or to pay a different amount, then this is classed as discretionary and can be included in a tronc scheme.
A: There are many benefits for using a tronc scheme to manage discretionary tips distribution, especially with the majority of tips and service charges now being paid through non cash means, or being added to the bill.
A tronc scheme ensures that the rules behind how the tips are distributed are clear and communicated to the staff.
One of the main reasons, however, is that it allows tips to be paid through the payroll, without attracting National Insurance tax for either the employer or employee.
A: A Troncmaster is the name for the independent third party responsible for managing the tronc scheme. This person can be employed by the business, or be a third party, such as one of our Troncmasters, but if they are an employee of the business, they must not be associated with leadership or hiring responsibilities in the business.
A: In short, no they cannot. This is a common mistake made by businesses. If a business owner or director is the Troncmaster, they cannot be said to be independent of the leadership or employment of staff, so them being the Troncmaster makes the tronc scheme non-compliant.
You should also be careful about appointing people such as Managers and HR people, as these could also fall foul of the criteria as they are involved in staff hiring.
Appointing an independent third party to act as Troncmaster can often be the simplest way around this. And, you don’t need to worry about a member of staff, who is acting as Troncmaster, leaving the business.
Distribution of Tips
A: There is no set way tips should be allocated through a tronc. As long as the distribution is ‘fair’ and transparent’ in accordance with the new Allocation of Tips legislation, you can create rules to suit your business and staff.
A: Yes, you can decide on tips and service charges are allocated. Many businesses use simple hours worked models with set percentages to the specific teams. So, for example it could be that of the pot of tips collected 50% go to front of house, 40% to kitchen and 10% to reception. It then depends on how many hours each team member worked in that pay period.
It can, however, be more complex with things such as points systems coming into play.
One of the benefits of our Troncmaster service is that we will work with you and your staff to determine the right distribution model for your business. One that is fair to all concerned.
A: If you are a multi-site business, you can run a single tronc scheme if you have a single PAYE scheme. With the new legislation, however, it is important to remember that each site must have its own fund and only employees who have worked on that site, or a central team who provide support to that site, such as prep kitchen, can be allocated tips from that site fund.
A: The frequency of distribution is up to you but usually businesses use the same frequency as staff are paid. We will work with you to set the best schedule for your business and staff.
The new Allocation of Tips legislation does state that tips must be paid out by the end of the month after the work was carried out, so it is no longer legal to hold back any funds for payment at a later date.
A: Under UK law, tips and service charges are subject to income tax. This will be through PAYE or self-assessment for cash tips.
If paying through a PAYE without a tronc then National Insurance is also applied, for both employer and employee.
If tips and service charges are paid out through a tronc scheme, then these payments do not attract National Insurance. This saves the employer 15% (from April 2025) Employers’ NI and the employee 10% NI.
Independent Troncmaster Services
A: Yes, Troncmasters services are completely legal and comply with UK tax laws and Allocation of Tips legislation. Having a tronc is not a prerequisite of the new legislation, but many of the regulations required by the law are satisfied through a compliant tronc scheme, such as fair distribution, transparency and keeping records.
A: Yes, Troncmasters services are completely legal and comply with UK tax laws and Allocation of Tips legislation. Having a tronc is not a prerequisite of the new legislation, but many of the regulations required by the law are satisfied through a compliant tronc scheme, such as fair distribution, transparency and keeping records.
A: Absolutely. In fact, it can be tricky to find someone within a business who has the ability to manage the scheme, but is not someone involved in the leadership or hiring for the business. Appointing an independent Troncmaster, such as the service offered by Tips and Troncs, gets around this issue.
In addition you can benefit from the expertise of an expert in this field who can help to set up and manage a complaint tronc scheme from day one.
Contact us to discuss our Troncmaster services.
A: Our Troncmaster service charges a small percentage of the total tips and service charges distributed. This fee covers the set-up, ongoing management, and compliance services.
For smaller tronc funds there may be a minimum charge applied.
A: The new Allocation of Tips legislation is now law and is due to be implemented from October 2024.
We are fully conversant with the new regulations and what they mean for hospitality businesses and tronc schemes. All our advice will be complying to the new regulations where required.
A: The start of our process is consultation with the business and staff to establish the fairest distribution rules for the tronc scheme. We will engage with your staff to explain the tronc scheme and gain their agreement to becoming a member of the tronc scheme.
For larger organisations, a tronc committee may be required, that consists of staff representatives. As Troncmasters, we will run the Tronc Committee meetings.
As Troncmaster, our team are available to answer questions and offer support at any time.
A: All our processes are transparent and you will be provided with a report every pay period that shows the distribution payments to your team.
A: The tronc payments should be itemised on a payslip.
If we handle your payroll, this will be part of our payslip and epayslips. We also provide an employee app, Elements, where your employees can see their current and historic tronc payments.
A: Our tronc services are stand alone and can be provided no matter how you choose to handle your payroll; through software, through your accountant or a third party payroll provider.
If, however, you are looking for an alternative to handle both your payroll and tronc, we can provide a full service through our payroll business, Ascend. This makes the process of payroll and tronc seamless and through a single user interface.