When you leave a tip at a restaurant or hotel, do you know where that money actually goes? Many places use a tronc scheme or “tip pooling” to share tips among all staff. While sharing sounds fair, these systems often cause headaches for everyone involved.
The potential problems with tip pooling
Pooling tips is commonplace because it is a fairer way of rewarding all the staff involved in the customer experience. The server may have been the ‘face’ of the service, but the kitchen, cleaning, and even admin staff also played a part.
But what starts as a fair concept can often become unstuck, and awareness of these potential issues can save a great deal of aggro and unhappy staff!
1. Nobody knows what’s going on
One of the most common issues is a lack of knowledge about how the tips are allocated. And a lack of understanding often leads to discontent.
Common things that are not communicated to staff include;
- How much tip money came in total
- How the money gets divided up
- If managers are taking a cut first
As one server told me, “We’re just told what our share is. We have to trust that it’s fair, but we never see any proof.”
2. Some people feel cheated
Tips are often split based on:
- The job
- How many hours each employee works
- How long the employee has been employed
- Some element related to performance
This often leads to bad feelings. Waiters who directly earn the tips might feel it’s unfair to share with kitchen staff. Meanwhile, cooks might think they deserve more since they make the food that gets tipped on.
It is good practice to involve staff in the decision-making process and to get their feedback. You won’t always please everyone, but if there is a consensus, it should keep most people happy that at least it is fair
3. Tax headaches
With tips now mostly coming in through card payments, employers are choosing to distribute them through payroll. This sounds simple, but without a tronc scheme, employers and employees could be overpaying on tax.
A tronc scheme is simply a tax-efficient system where all tips are collected together and then shared among staff. Tronc schemes are run by an independent Troncmaster who is responsible for running the scheme and arranging the distribution of the tips received.
A compliant tronc scheme, run by an independent Troncmaster, ensures that only tax is deducted. Employees’ NIC (8%) and Employers’ NIC (15%) do not need to be paid, so both save significant amounts. But there is the potential for problems and issues;
- Choosing the wrong Troncmaster can result in non-compliance
- Tax rules change all the time
- Getting it wrong can lead to investigations and potential fines
- Keeping proper records is a lot of work
5. Paperwork nightmare
Running a proper tronc system means:
- Tracking every penny that comes in
- Doing complex math to split it fairly
- Explaining the system to staff
- Handling tax paperwork
- Dealing with complaints
This is especially hard for small restaurants with limited staff. This is where an independent Troncmaster is worth its weight in gold.
6. Room for cheating
Without good oversight, these systems can be manipulated:
- Managers might favour certain employees
- The person dividing the money might not be neutral
- Manual tracking can lead to mistakes or dishonesty
- High staff turnover makes it hard to keep track
7. Staff arguments
Perhaps the worst outcome is how tip pooling can create a toxic workplace. There is nothing more contentious and corroding to a work culture than when people don’t feel they are being treated fairly.
In this environment, staff are not going to be motivated to deliver the best service. Staff will leave, and recruiting new staff is a major headache in the hospitality sector.
Making tip pooling work better
So, how can you make sure that your tips policy is working for you and your staff and not against it?
Be completely open
Show everyone exactly how much came in and how it was divided.
The new Allocation of Tips legislation now dictates that 100% of tips should go to staff and that the tips policy should be transparent and open to staff. But this was always best practice, even before the legislation.
Think about how and when you can communicate your Tips Policy to staff.
- Part of the recruitment process
- Onbaording
- Staff handbooks/intranet/web page
- Periodic staff communications and reminders
In addition to this, it is recommended that staff have a forum or means of expressing concerns. If you have a tronc scheme, this would be your Troncmaster or Tronc Committee if you are a larger organisation.
Use better technology
Use computer systems to track tips automatically. Let software handle the calculations to avoid any bias. An independent Troncmaster service will undertake all necessary calculations for distribution. Keep digital records that everyone can check on their own time. Give staff access to see the numbers whenever they need to.
Communicate with your customers
It is also important to let your customers know your policy regarding the distribution of tips. There has been a great deal of bad news about unscrupulous business owners holding back tips and not allocating them fairly. Although the new legislation aims to stop this, customers often worry that the tip, or all of the tip, is not going to the staff.
So, make sure your servers are fully briefed on what to say if asked. And, even better, is if you are upfront on menus, website and on-table items, a statement about the fairness of your tips policy.
While tip pooling tries to solve one problem, it often creates many others. The best restaurants, bars and hotels recognise that any system for sharing tips must be fair, open, and motivating for staff.
By fixing these common problems, businesses in the hospitality industry can make sure that when customers leave extra money to show appreciation, it benefits the workers and leads to better service.