A tronc system is an independent system for collecting distributing tips and service charges among staff. A troncmaster, not the employer, decides how the money is split. It allows these amounts to be exempt from NICs for both the employer and employees.
Rules
- For a Tronc to be compliant with HMRC guidelines, and therefore exempt from National Insurance Contributions, the troncmaster must be separate to the employer. This can be a senior or trusted staff member, or an external tronc scheme.
- All Tronc schemes must be registered with the HMRC as an external PAYE scheme to be compliant and exempt from NICs.
- Employer must not set, influence, or revise the allocation formula.
- You must create a written tronc policy, detailing eligibility, distribution rules, frequency etc. This must be approved by all staff.
- Tronc records must be kept separate from main wages, with documentation kept for three years.
Benefits
You save 15% NICs on all gratuities, while your employees save 8%.
A well-run Tronc can ensure you remain compliant with The Employment (Allocation of Tips) Act.
A Tronc scheme ensures you have accurate records for all tips and service charges, as required by law.
A Tronc scheme ensures fairness and transparency, boosting staff morale.