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Tronc Schemes

Helping your business comply with HMRC’s rules regarding gratuity

We have significant experience in advising hospitality businesses to manage the fair distribution of tips, gratuities and service charges.

Our Tronc Scheme Service

We can help you set up a tronc system, which is a special pay arrangement, enabling the fair distribution of tips, gratuities and service charges to staff. Such distributions paid via a tronc may mean that they are exempt from National Insurance contributions (NICs).

The word ‘tronc’ is believed to be from the French words ‘tronc des pauvres’ meaning ‘poor box’. Having developed from the old boxes left in churches to collect money for the poor, a tronc is now a term for a special pay arrangement used to distribute tips, gratuities and service charges. All the while, being a sophisticated way of saving National Insurance Contributions (NICs) in the hotel and hospitality industry. We can help you with advice on how a tronc system works, how it could benefit your business and employees, as well as with the set up and administration of the tronc.

How a tronc works

Legislation states that any amount paid to an employee, which is “the payment of a gratuity” or “in respect of a gratuity” is exempt from NIC’s if:

  • It is not paid directly or indirectly to the employee by the employer and does not comprise or represent monies previously paid to an employer
  • It is not allocated directly or indirectly to the employee by the employer

In most cases if your business passes a tip to an employee, then your business is responsible for NICs because neither of the above two conditions are met. This is where a tronc becomes useful.

The tronc is a means of collecting the tips from the customers. The tronc effectively holds the tips from the customer in a common fund. Usually a ‘troncmaster’ will be appointed (this could typically be the Head Waiter) and they will be responsible for collecting the tips (the tronc) and distributing the tips.

This has the benefit of fulfilling the above two conditions and meaning the payment can be made without deduction of NICs.

Income tax is still payable on the income received by the waiting staff and under certain circumstances, the ‘troncmaster’ may also be required to operate a PAYE scheme and deduct income tax before making the payment. The tronc must be registered with HMRC.

As well as the potential exemption from NICs outlined above, a tronc is a fair and transparent way of managing tips, gratuities and service charges.

In addition to those on the balance sheet, there are also more emotive benefits, which have the potential to add to the success of your business. A tronc ensures that hotel and hospitality staff receive the tips they have worked for; making them feel valued. This increases staff retention, promotes high service levels, and enhances reputation.

Tronc Scheme Specialists

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Business stakeholders benefit from our experience and ability to provide practical solutions as they grow, develop or require support through operational turnaround.

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