With the rate of employer NICs having increased this month, as well as the newly-implemented Employment (Allocation of Tips) Act 2023, more hospitality businesses are implementing Tronc systems. Tronc systems are a very tax-efficient and compliant way of managing tips and gratuities in your business. However, if your business is new to Tronc, you might have a few questions before getting started. In this post, we’ll break down some of the most commonly asked questions about Tronc systems.
What exactly is a Tronc system and how does it work?
A Tronc system is a method of pooling and distributing tips according to a predetermined policy. A troncmaster, often a senior member of staff or external Tronc provider such as JustTronc, will separate tips from your business and payroll and distribute tips fairly among your team. This separation, under HMRC regulations, saves the business owner 15% employer NICs on all tips and gratuities.
Why do UK hospitality businesses need a Tronc system?
The main benefit of implementing a Tronc system is the NIC exemption. Tronc systems that comply with HMRC guidelines are not liable for the 15% employer NICs on tips and gratuities. This makes it a cost-effective tool for hospitality owners.
Another advantage of implementing a Tronc system is compliance with the Employment (Allocation of Tips) Act 2023. This code of practise outlines newly legal requirements for handling tips and service charges in the UK. These requirements include timely payouts, fair distribution, and transaction reports for all tips, all of which a well-run Tronc system provides.
Who can act as a troncmaster and who cannot?
In order for your Tronc system to be compliant with HMRC guidelines, and therefore exempt from the 15% employer NICs, your troncmaster cannot be an employer/business owner. The safest course of action is to utilise an external Tronc system, such as JustTronc, to ensure fairness and compliance.
How should tips be distributed fairly under a Tronc system?
Troncmasters can take several factors into account when deciding how to distribute tips. This can include hours worked, seniority, role, or how involved the staff member is with the customer service experience.
These factors must be outlined in your business tipping policy, and staff must be aware of how/why their tips are split.
Can tips collected through contactless payments or apps be included in a Tronc?
All tips collected in your business can be included in your tronc system. No matter how you collect gratuities, they must all go towards your staff and be split fairly.
It is important to also remember that under the Employment (Allocation of Tips) Act 2023, service charges must be treated the same as other tips/gratuities. Service charges can also be paid out to staff through a Tronc system.
Is it better to manage Tronc in-house or outsource it to a specialist provider?
While Tronc systems can be managed in-house, there are a lot of advantages to outsourcing your Tronc system. Outsourcing your Tronc system takes the hassle of tip management out of your hands, which not only saves you money through NIC exemption but also saves you a lot of time spent on admin. Your liability when it comes to compliance or financial penalties is also eliminated.
