What is tronc?
What is tronc?
In the UK, a tronc is an organised arrangement used by businesses to manage the collection, pooling, allocation and distribution of tips, gratuities, and other service charges received from customers. The term "tronc" is derived from the French phrase "tronc des pauvres” which translates as "poor box." Tronc arrangements are commonly used in the hospitality and service industries, such as restaurants, bars and hotels.
The responsibility for managing a compliant and efficient tronc falls on the designated troncmaster, who is typically an employee of the business. The troncmaster is responsible for arranging the allocation and distribution of tips and service charges among the eligible employees. It’s important to properly track and document the distribution of tips through the tronc , as this information is used to inform the payroll process and ensure compliance with tax legislation.
In the UK, the tax treatment of tips and gratuities is governed by His Majesty's Revenue and Customs (HMRC). There are complex tax rules to consider which determine how tax (and possibly National Insurance Contributions) must be accounted for under PAYE. Where a tronc is operated, the responsibility for ensuring tax is applied lies with the troncmaster. However, if HMRC determines that a tronc and/or troncmaster has not been compliant, they can seek financial redress from the business.
Proper tronc management can help businesses meet these reporting requirements and avoid potential liabilities, interest, and penalties.
In addition, HMRC requires employees that receive cash tips to report these and to pay any applicable taxes personally.
How to set up your tronc
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The troncmaster is responsible for managing the tronc and arranging the allocation and distribution of the tips and service charges among the eligible employees. The business can designate a troncmaster and therefore it’s important to choose a trustworthy and reliable individual for this role.
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Not all employees may be eligible to receive a share of the tips and service charges. It’s important for the troncmaster to clearly define which employees are eligible and how their shares will be calculated. They key point here is to ensure there is ‘fairness’, such that all that contribute towards the customer experience, are rewarded.
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This may involve setting up a dedicated bank account for the tronc and establishing procedures for depositing and distributing the funds. A separate payroll may be required or the employer’s payroll may need configuration.
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It’s important to clearly communicate the details of the tronc to all eligible employees, including how their shares will be calculated and when they will receive their payments. It’s very important that such communications come from the troncmaster to ensure independence. Appropriate policies and documentation are vital in supporting the overall tronc arrangements.
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In the UK, the tax treatment of tips and gratuities is governed by His Majesty's Revenue and Customs (HMRC). It is important to ensure that the tronc arrangement is set up in a way that complies with HMRC's guidelines. Employees must also be advised on how to declare any cash tips received personally, to HMRC.
In addition, the Employment (Allocation of Tips) Act 2023, which comes into force from 1 October 2024, requires fairness, transparency, 100% distribution and payment to staff in a timely manner. It also provides a route for complaints to be taken to an employment tribunal.
It’s important to carefully track and document the collection and distribution of tips and service charges through the tronc arrangement to ensure compliance with tax legislation and to accurately inform the payroll process.
Tronc best practice
Tronc committees
There is no requirement for a committee to be formed. However, if one is desired there should be clearly defined roles and objectives.
In general terms, the troncmaster is responsible for administering the tronc and arranging distribution of the funds, while the tronc committee is responsible for representing the interests of the employees and ensuring that the distribution is fair.
Get your ducks in a row
Establish a clear and transparent process for distributing tips.
This should include a system for collecting and recording tips, as well as a method for determining how the funds will be distributed among employees.
Clear communication
Communicate the tronc arrangement to all employees. It is important that everyone understands how the system works and how they will benefit from the tronc.
Ensure supporting policies and documents are in place.
Leave it to the pros
Outsourcing tronc management can help to ensure that the arrangement is administered accurately and efficiently.
They have the expertise and resources to handle the administration of the tronc, which can save businesses time and reduce the risk of errors.
How we can help with your tronc
Although we offer a variety of services, our key focus is helping you and your business remain compliant with the everchanging legislation, and getting the most out of your tronc arrangements - both for the business and for your employees.
Advice and consultancy services
Troncmaster partnerships
Compliance audits
Subscription-based models to keep close to your cashflow
Market leading technology solutions covering digital cash tips and outsourced troncmaster services and payroll.
Solutions that allow staff to access their tips almost instantly (no waiting weeks and weeks for payday) to assist with the current cost of living crisis.
Compliance with the new Employment (Allocation of Tips) Act 2023.