In the article below, uncover the advantages of tronc schemes for UK golf courses, including National Insurance Contribution savings and compliance with tipping legislative requirements.

In the UK, an increasing number of golf course resorts (resorts) are collecting gratuities, tips and service charges (tips) voluntarily given by their customers, with no obligation to pay such. Primarily, these are collected through food and beverage services. However, many such resorts also receive voluntary tips directly from their members, whereby the tips are accumulated and paid out periodically. However, under the Employment Allocation of Tips Act, resorts will no longer be permitted to retain and distribute tips in this manner.

We commonly see resorts distribute tips to their workers through the main payroll, which means they’re taxed as salary, and workers receive them net of both Income Tax and employees National Insurance contributions (NIC). Additionally, in these circumstances, resorts would be required to pay employers NIC on the distributed tips, leading to increased and unnecessary costs. We have also seen resorts utilise a proportion of the tips collected to offset employer NIC costs, thus reducing the available tips to distribute to workers, which can understandably cause staff dissatisfaction. This practice is prohibited under the Tipping Act.

This raises the question of how tronc systems can provide relief to such businesses while complying with the legislative requirements of the Tipping Act.

How does tronc work?

By implementing a tronc that meets all necessary criteria, all tips voluntarily given by resort customers qualify for both employers and employees NIC exemption. Given that employer and employee NIC total over 25%, this represents significant savings for both the employer and workers of the employer. 

Maintaining a well-functioning tronc arrangement is crucial to avoiding potential penalties and HMRC challenges, as well as complying with the Tipping Act.

For resorts seeking to attract and retain talent, having a tronc system can be a valuable competitive advantage. Employers can shed the administrative complexities of tip distribution, while workers can have trust and confidence that their tips will be delivered in full compliance with the law.

What is the legal requirement?

The Tipping Act defines how employers must deal with tips voluntarily given by their customers and makes it a legal requirement for the full tip amount to be allocated fairly between workers. This means that resorts will be unable to deduct fees/charges from tips collected and will be required to follow a Statutory Code of Practice to ensure any allocation is fair. In addition, all tips must be paid out to workers by the end of the following month the tip is collected, thus removing any accumulation element of tips over the course of a year. There will also be record-keeping and written tipping policy requirements to adhere to.