If your hospitality business uses agency workers and you have a tronc scheme in place, there’s a reasonable chance those two things aren’t properly connected. And since October 2024, that’s a compliance gap you can’t afford to ignore.
The Employment (Allocation of Tips) Act 2023 extended tipping rights to agency workers. It’s one of the most commonly overlooked aspects of the legislation, and it’s catching businesses out, particularly those that set up their tronc scheme before the Act came into force.
Agency workers have the same rights as directly employed staff
Under the Act, agency workers are entitled to a share of qualifying tips and service charges on the same basis as your permanent team. The legislation is clear on this: they cannot receive a lower share simply because they’re supplied through an agency rather than employed directly.
In practice, this means your Troncmaster must factor agency workers into the tronc allocation, applying the same criteria used for the rest of your workforce inbcluding hours worked, role, and contribution during the period when tips were collected.
Where it gets more complicated is in how the payment actually reaches them.
The two-step payment process
For directly employed staff, the process is straightforward: the Troncmaster allocates, and the payment is made through payroll. For agency workers, there’s an additional step.
The employer or Troncmaster transfers the allocated amount to the supplying recruitment agency, not to the worker directly. The agency then has one month from receipt of those funds to distribute the tips to the individual.
That chain of responsibility matters. If the agency doesn’t distribute on time, the worker can bring a tribunal claim, and both the venue and the agency could face scrutiny. Making sure your agency partners understand their obligations under the Act is an important part of getting this right.
What this means for National Insurance
For directly employed workers, a compliant tronc scheme is exempt from both Employers’ and Employees’ National Insurance contributions. At current rates of 15% Employer NI and 8% Employee NI, the savings are substantial.
For agency workers processed through a tronc, the position is more nuanced. Because the employment relationship sits with the agency rather than the venue, the agency’s own PAYE and NI obligations come into play when they make payment to their worker. This is why clear communication between the operator and agency is essential, and both parties need to understand how the payments will be processed and reported.
If you’re unsure how this applies to your specific setup, take specialist advice. Generic payroll providers don’t always have the tronc knowledge to give you a clear answer, and these are precisely the gaps that leave businesses exposed.
Getting your documentation right
If you use agency workers, your tronc rules and your written tipping policy need to address them explicitly. Under the Act, your tipping policy must be made available to all workers, including agency staff, so they understand how tips are collected, allocated, and paid.
Your records should be able to show:
- That agency workers were included in the tronc pool
- The basis on which their share was calculated
- That the relevant amount was transferred to the agency within the required timeframe
- The agency received the funds and distributed them accordingly
Records must be kept for three years. Workers, including agency workers, can request a statement of their individual tip allocation once every three months, and you have four weeks to respond.
The gap that catches businesses out
What we see time and again is a tronc scheme that’s broadly compliant;
- Independent Troncmaster
- Documented allocation
- Timely payments
But agency workers have simply been left out. Not deliberately, they just weren’t factored in when the scheme was put together.
Since October 2024, that oversight has real consequences. An agency worker who believes they’ve been unfairly excluded from tips can bring an Employment Tribunal claim, with potential compensation of up to £5,000 per worker. In a busy venue that regularly relies on agency cover, the exposure adds up quickly. And the reputational damage of being seen to withhold tips from workers, when the legislation was specifically designed to prevent that, is something no business wants.
A note on fairness
The Act also requires that agency workers are not treated less favourably simply because they’re temporary or agency-supplied. The Troncmaster must apply objective, consistent criteria to everyone who was working when those tips were earned.
There can be legitimate reasons for different allocations between workers, such as role, hours, seniority, and level of customer interaction. What you cannot do is apply a blanket policy that excludes or reduces agency workers’ share without any objective basis for doing so.
How Tips and Troncs can help
Getting agency workers into your tronc scheme correctly isn’t complicated, but it does need to be done properly. We act as independent Troncmaster for hospitality businesses of all sizes, making sure your allocation rules are compliant, your documentation is watertight, and that every worker, including agency staff, is processed each pay period correctly.
If you’re running an existing scheme and you’re not sure whether it covers agency workers, it’s worth a review. If you’re starting from scratch, we’ll help you build something that’s right from day one.
Get in touch – we’re happy to have a no-obligation conversation about where you are and what you need.