We speak to hospitality businesses about troncs every week, and the same handful of questions come up again and again. But alongside those, there are a few questions clients rarely think to ask, but probably should.
The most common tronc questions
What is a tronc scheme?
Although tronc schemes have been around for years, many people and businesses still don’t know what they are (or have heard the term but aren’t sure what it means).
In the simplest terms, a tronc scheme is an HMRC-approved pay arrangement that allows a business to collect, pool and distribute discretionary tips (tips, gratuities and service charges) according to fair and agreed distribution rules. The benefit to a tronc scheme, aside from the fact that the tip distribution is fair and transparent, is that tips through a tronc scheme do not attract National Insurance Contributions. That’s a saving of 15% for employers and 8% for employees.
Do we legally have to run a tronc scheme?
No, a tronc scheme isn’t a legal requirement. But since the Employment (Allocation of Tips) Act 2023, businesses must allocate tips fairly and transparently, and a compliant tronc scheme is the most straightforward way to prove that.
Find out more about what is required from the Tipping Legislation
Can we choose how tips are shared out?
You can base distribution rules on hours worked, role, seniority, or a points system that combines several factors. What matters is how the decision-making about the rules has come about. The method must be fair and consistent, staff have been consulted and it must be made by the Troncmaster, who is independent of employment responsibilities.
Check out our blog on ‘Who cannot be a Troncmaster’.
Who runs the tronc?
A tronc scheme is run by a Troncmaster. This can be someone from within the business or an independent provider. The Troncmaster is the person who makes decisions about how tips are shared, so if you go down the internal person route, you need to make sure they operate outside of the business owners and don’t have hiring responsibilities.
An internal Troncmaster needs to be someone who has time for all the admin, is trusted by employees to be fair and has the confidence to make decisions their colleagues might not always like and handle queries from them.. Many businesses now prefer an independent Troncmaster to keep the process at arm’s length from day-to-day office politics, and avoid burdening a busy member of the team.
Read about what makes a good Troncmaster.
Do I need a separate PAYE scheme for my tronc?
No, you don’t have to have a separate PAYE scheme for your tronc scheme. You can have a separate PAYE, but it is not necessary, and having so can cause issues in multiple tax codes for employees as well as additional payroll processing admin.
We have looked at this issue in depth in our article ‘Why a separate PAYE scheme is unnecessary for tronc arrangements’.
Do agency workers need to be included?
Since the Allocation of Tips Act, agency workers now must receive a portion of the tips for the shifts they have worked. Before the change in legislation, this was not the case, and agency workers often received a higher hourly rate of pay than employees but no tips. This is an area many schemes still get wrong, and one that’s increasingly under scrutiny.
Read more about how to handle agency workers in tips distribution.
What happens if we get it wrong?
Employees now have a clear route to challenge unfair tip allocation through employment tribunals. That means poor record-keeping or an allocation method you can’t justify isn’t just a compliance gap; it’s a real financial and reputational risk.
What clients should be asking
Has our tips policy actually been consulted on?
Fairness isn’t only about the numbers. Employees should have had a genuine opportunity to give their views on the policy, not just be told how it works after the fact. Many businesses assume they’ve covered this when they haven’t.
The Employment Rights Act will be making consultation a formal and regular legal requirement.
Would my tipping policy hold up in a tribunal situation?
As part of the new Tipping Legislation, employees can bring a tribunal claim if they feel an employer hasn’t allocated tips fairly, hasn’t kept proper records, or doesn’t have a written tipping policy. This could be either directly or through a tronc scheme.
How would a tribunal assess your tipping policy?
Are we keeping up with how the rules are still developing?
The Employment Rights Act 2025 continues to build on the 2023 Tips Act, and consultation requirements in particular are an area to watch. Although the revised Code of Practice has recently been withdrawn, it will be reissued, probably by the end of 2026, and hopefully will clarify some of the grey areas.
How much is it costing to process tips through payroll outside a tronc scheme?
If companies are distributing tips without a tronc scheme, those tips will be classed as income for the purposes of tax and National Insurance. This can result in high costs for an operator. For example, a chain of restaurants bringing in £50,000 a month in tips would be liable for £7,500 a month in Employers’ NIC; that’s £90,000 a year! And employees would be deducted £48,000 in Employees’ NIC. Money that should stay in their pockets.
A tronc is one of the easiest ways to help hospitality businesses save money. In a sector under such financial pressure, that’s a good thing. But as these questions show, there’s plenty of complexity and nuance that can trip operators up. That is why so many choose to use an independent Troncmaster service like
Tips and Troncs.
Contact us to find out more about our independent Troncmaster service