The Tronc System Explained: Tips,
NIC and Keeping Staff Happy
A well-run tronc gets tips to your team tax-efficiently and keeps you compliant.
Here is how it works.
By Kendall Golding, Office Manager
Since 1 October 2024, the law requires employers to pass on all tips to workers in full, without deductions. A tronc is the tried and tested way to share tips fairly and, done properly, save National Insurance for everyone.
What is a tronc?
It is a pooled fund of tips shared among staff, run by a “troncmaster” who decides the allocation independently of the business.
The National Insurance saving
If tips are distributed through a genuinely independent tronc, they can be free of employer National Insurance (around 15%) and employee National Insurance (up to 8%). That is a real saving on every pound of tips, money that stays with your team and your business.
The catch: independence
To keep that NIC exemption, the employer, directors and any manager who hires, fires or disciplines cannot decide who gets what. The troncmaster, who can be an ordinary member of staff or an external specialist, must make those decisions.
The 2024 Tips Act
The Employment (Allocation of Tips) Act means that, from October 2024, you must pass on 100% of tips, have a written tips policy, and keep records. A tronc sits neatly alongside these rules.
Income tax still applies: tips remain taxable, and the troncmaster operates PAYE on the distributions. It is the National Insurance saving, not income tax, that a tronc delivers. Set it up properly and it is a win for everyone. Set it up sloppily and you risk losing the exemption and falling foul of the new law.
As hospitality specialists, we help pubs, restaurants and hotels set up compliant, tax-efficient tronc schemes and get the paperwork right.
