The Tronc System: Can It Benefit Your Hospitality Business?

With the introduction of the new UK tipping law, understanding how to handle tips has become more crucial than ever.

Hospitality businesses face increased scrutiny and pressure to ensure fair and transparent tipping practices. Common practices like withholding a portion of tips or imposing deductions can no longer happen under the regulations of the new law.

Tips are a crucial benefit in an industry often reliant on minimum-wage employees. They serve not only as additional income but also as a source of motivation. After all, happy employees lead to satisfied customers – no mystery here. And this is where a tronc can play a vital role.

In today’s blog post, we’ll examine what a Tronc scheme is and how it can help your hospitality business comply with the new regulations.  

What is a Tronc?

A tronc is a system for collecting and distributing tips and service charges separate from the employer. It operates independently, managed by employees themselves or a designated troncmaster.

The word comes from the French “tronc des pauvres” – collecting boxes that accept donations for the poor.

Today, the concept has evolved into a common practice in the hospitality sector and service industries, where a tronc serves as a mechanism for collecting and fairly distributing tips among staff members.

The Tronc system simplifies the often-complicated processing of gratuities. As a hospitality operator, you know what that can look like… So, it essentially consolidates the tips into one place and distributes them according to a pre-agreed formula, such as one based on hours worked or roles performed. This way, all staff — front and back of house — are rewarded for their contributions.

As you can imagine, with the new Fair Tips Act on the horizon, tronc systems will become even more pertinent. They can help businesses reduce the risk of complaints and non-compliance.

Tips are also exempt from National Insurance Contributions (NIC) – an attractive incentive for businesses to adopt tronc arrangements.

What is a Troncmaster?

A Troncmaster is the person responsible for managing the tronc system, typically someone trusted within the business. Often, this person is a senior employee like a head waiter or manager.

They're responsible for handling the day-to-day operations of the tronc system, including collecting tips, keeping records, and distributing them to staff.

It's important for the troncmaster to be impartial and trustworthy, as they play a crucial role in ensuring fair treatment of all employees when it comes to tronc payments.

Appointing a Troncmaster

Appointing a troncmaster is typically done by the employer or business owner, who may choose someone trusted within the business. But it can also be done through a committee.

Alternatively, businesses can opt to outsource this role to a third-party tronc management company and get an independent troncmaster.

In either case, it's very important to select someone or a service provider who is impartial, trustworthy, and capable of handling the responsibilities associated with managing this special pay arrangement.

What's the New Tipping Law all about?

The new tipping law ensures that 100% of tips go directly to workers (front and back of the house, agency workers) without any deductions.

It prohibits employers from taking a cut or making any deductions from tips. The Employment (Allocation of Tips) Act received Royal Assent in May 2023 and will take effect on July 1st, 2024.

Under the new law, employers must have a transparent tipping policy, available to all staff members, a keep a tipping record.  All tips must be paid by the end of the month following the month in which the tips are paid by customers. The law covers non-cash and cash tips.

Also worth noting that employers can be taken to the Employment Tribunal if they break the rules. You certainly don’t want that – not to even mention the bad rep it would bring you.

To support the new Tips Act, the government created a Code of Practice to guide employers and workers in the fair and transparent allocation and distribution of tips. It is currently in draft form.

What Are The Advantages of Using a Tronc System?

Here at Outmin, we work closely with the hospitality industry. And we know very well how chaotic everyday operations can be. A lot of you are drowning in admin work, frustrating manual tasks, and accounting operations that completely drain you of time and energy (and yes, if that’s you, we can help).

Dealing with tips can be an extra administrative burden that just adds to your overfilled plate. Putting a tronc system in place can really simplify the whole process.

With a tronc in place, the responsibility for managing tips is shifted away from the employer and placed in the hands of a designated troncmaster or a professional tronc service.

With a tronc in place, the responsibility for managing tips is shifted away from the employer and placed in the hands of a designated troncmaster or a professional tronc service. So yes, that’s one big advantage of having a tronc system.

Other important benefits include:

• Tips distributed through a tronc system are not subject to NIC, which means more money goes to the hospitality staff, and the employer also reduces operating costs (if you manage it yourself you have to pay NIC and income tax).
• A tronc system ensures a fair distribution of tips and service charges, which can boost employee morale (plus, happier customers, of course).
• A tronc system helps you stay fully compliant with the new tipping law and avoid (very unpleasant) surprises that can cause trouble for your business.

Wrapping It Up

So, there you have it – the lowdown on troncs and how they can be a game-changer for your hospitality business. With the new tipping law shaking things up, having a tronc system in place can really save the day – it simplifies the tipping process, keeps you compliant, and puts more money in your staff's pockets. 

At Outmin, our purpose is to empower hospitality businesses like yours with streamlined accounting solutions. We're here to be your partner every step of the way, ensuring smooth operations and compliance with regulations.