Earlier this year, a West London Department Store was targeted by campaigners after it emerged it was keeping up to 75% of its restaurants tips – up to £2.5m a year. The store has since pledged to review its position, but the story is a familiar one. Customers generally pay a 12.5% optional charge on bills to reward the staff who served them, but they are frequently disappointed. Cases of employers unjustly reaping the rewards show no sign of slowing.
So what’s the solution? How can businesses in the hospitality, leisure and service sectors distribute tips fairly and transparently? Many employers decide to distribute gratuities by adding it to the general payroll. But there’s a drawback: the extra is often taxed as salary, meaning the staff receive it net of Income Tax and National Insurance Contributions (NICs).
Enter an alternative option, one which benefits all: troncs.
A tronc is a special pay arrangement used to distribute tips, gratuities and voluntary service charges given by customers to staff. The word finds its roots in 1920s France where “tronc des pauvres”, or collecting boxes, were used to accept donations for the poor.
A troncmaster is an individual solely responsible for arrangements to share tips, gratuities and voluntary service charges given by customers to staff.
The reasons for having a tronc are pretty simple:
- Staff can have up to 100% ownership of their hard-earned tips with a say in how they are shared out between front and back of house staff.
- The arrangement can be genuinely independent, free from employer interference and influence, run for the benefit of staff.
- Staff and customers can refer to formal rules that set out how the service charges are allocated and distributed.
To ensure tips are not subject to NICs, the troncmaster must not be the proprietor, a partner or other company official. Moreover, employers must not decide or get involved in the allocation of tips. Employer and employee NICs total over 25%, so this represents a significant saving, which can be passed on to employees’ take-home pay.
There is growing demand for troncmasters who are not employees of the business, and therefore cannot act under the influence of an employer. Businesses see the advantage of someone with up-to-date knowledge of tronc rules, who acts fairly and ethically – free of bias, favouritism and personal friendships or motivations.
To help our hospitality clients form trusting relationships with their employees and customers, we recently launched a new service as independent troncmasters. Our troncs are completely transparent, conform fully with HMRC requirements, provide exemption from NICs and offer significant savings to employers and staff. Each role is bespoke and tailored to assist our clients in recruiting, motivating and incentivising their employees. We only agree to act as troncmaster if NIC savings are passed on to members of staff.
Next time you’re paying a discretionary service charge remember to consider whether or not your money is actually being distributed fairly. With a troncmaster, you can be sure it is.
Want to speak to an expert regarding tronc schemes?
Call us today on +44 (0)20 7556 1243 or fill in the form below and a member of our team will be in touch.