Chartered Certified Accountants
TRONC ADVICE & TRONCMASTER SERVICES
- Specialist tronc advice
- Independant troncmaster for restaurants, bars and hotels
- Employment (Allocation of Tips) Act
Dealing with cash tips, service charge and tronc has become a real concern for many restaurant and hospitality operators.
Despite the negative press publicity and misunderstanding by the public, a correctly structured tronc can increase employees take home pay, reduce employer cost, and provide operators a means of recruiting, motivating and incentivising employees.
When operated by an independant troncmaster, the distribution of service charge ensures fair and transparent allocation and exempt from national insurance contributions (NICs) for both employee and employer.
EMPLOYMENT (ALLOCATION OF TIPS) ACT
The Employment (Allocation of Tips) Act 2023 which came into effect on Tuesday, 1st October 2024 imposes a legal obligation on employers to distribute service charge (including tips and gratuities) to workers.
In summary:
- Employers are required by law to distribute 100% of service charge, tips and gratuities to workers from 1st October 2024.
- Service charge, tips and gratuities must be distributed “fairly” between all workers.
- The Employment (Allocation of Tips) Act 2023 further states that “Employers must take extra care to avoid indirect discrimination, which may be unintentional, which may be a risk when fewer tips are allocated to a group of workers which includes a disproportionate number of workers with a particular protected characteristic”
- Service charge, tips and gratuities must be distributed no later than the end of the month, following the month in which the payment was made by the customer i.e. all service charge, tips and gratuities received in September much be paid to workers by the end of October.
- Service charge, tips and gratuities received at or attributable to a single venue must be allocated amongst workers at that venue (i.e. cannot be pooled and distributed between venues), unless there is clear evidence that a site or non-public place of business provides direct support to a site such as Head Office.
- Employers are prohibited from making deductions from tips including for credit card fees, bank charges, payroll or other administration costs and commissions. These costs must now be covered by the business.
- Agency, temp and occasional workers are now given new rights and must be awarded service charge, tips and gratuities on the same basis as directly employed staff (with the exception of people who are self-employed, or invoicing through their own company).
- Employers must keep a written tronc policy and keep detailed records. Workers will be able to see their employers tronc records (limit to one request per worker in a three month period) and have a right to bring a claim in the Employment Tribunal.
- Employment Tribunals now also have the authority to enforce these rights and provide remedies in the event of breach. The remedies outlined under the Act include making a declaration that an employer has failed to comply with its obligations under the Act, ordering an employer to revise any tip allocation previously made or make a payment direct to a worker, and paying compensation for financial loss up to the value of £5,000.
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Independant Troncmaster
and Troncmaster Services UK
Prysm Financial Troncmaster Services are trusted tronc partners of some of the London’s leading Michelin-starred restaurants, fine dining restaurants, themed restaurant groups, hotels, franchises, individual bistros, gastro pubs, bars and pop-ups.
KEY TRONC AND TRONCMASTER FAQS
What is a troncmaster?
A troncmaster is the person responsible for distributing tips, gratuities, and service charges fairly among employees in a business – usually in the hospitality industry such as restaurants, bars and hotels.
Is service charge subject to VAT?
Discretionary service charge not subject to VAT.
Troncmaster responsibilities
A troncmaster is responsible for independently managing the fair distribution of tips, service charges, and gratuities among staff. Their duties include setting and applying clear allocation rules, registering the tronc with HMRC, ensuring correct PAYE tax treatment, and keeping accurate records. Importantly, they must act impartially – free from employer influence – to ensure full compliance with HMRC and tipping legislation.
Is tronc part of salary?
No, tronc should not be part of an employees contracted salary.
How to set up a tronc scheme?
To set up a tronc scheme, you’ll need to appoint an independent troncmaster to manage tip distribution. Next, establish clear rules for how tips will be allocated among staff. Finally, integrate the tronc into your payroll system to ensure tips are taxed correctly and all records are maintained for compliance. Working with a specialist troncmaster can simplify the setup and ensure everything is fully compliant.
Who can be a troncmaster?
A troncmaster can be any individual who is independent of the employer and is responsible for fairly distributing tips, gratuities, or service charges among staff.
Employment (Allocation of Tips) Bill
The Employment (Allocation of Tips) Act 2023 is a UK law that ensures all tips, service charges, and gratuities are distributed fairly and in full to workers, with a written policy, transparent records, and no employer deductions except for tax.
Tronc meaning UK
In the UK, a tronc is a special arrangement used to distribute tips, service charges, and gratuities fairly among employees, usually in the hospitality industry.
