Everything you need to know about Tronc and the new gratuities legislation

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While Tronc payments – or at least the word itself – are known about across the hospitality and leisure sector, the mechanics of how it currently works may well be a bit of a grey area. And with new legislation coming into force in 2024 to ensure it’s working fairly, this is a good time for a reminder of what it is, how it works, and what the changes in law mean to both proprietors and employees.

Tronc payments – a definition and recap

Across the hospitality industry a tronc is a commonly-used method by which workers “should” give a fair and proportionate share of any tips, gratuities and service charges that are a result of good service.

This little-heard word derives from a term that rose to popularity in 1920’s France called “tronc des pauvres”, which translates as collecting boxes for donations to the poor.

Right now there are around 150,000 hospitality businesses that use a tronc system. This usually excludes a direct tip or payment that is either left on the table or handed to a specific member of the team, but in some establishments even these are gathered up so the Troncmaster controls distribution.

In order to ensure this is fair and evenly distributed a troncmaster is appointed. This person in theory should show no favour or bias and ensures the system of payment operates in a democratic and agreed manner. It’s by no means a minor role as they need a full understanding of the establishment’s PAYE and income tax process. This is why a number of businesses may decide to outsource the role to a third-party who specialises in handling a tronc scheme, rather than making this the responsibility of a team member.

If all runs to plan, the benefits of a Tronc scheme are as follows:

• Team members may get as much as 100 per cent of tips with a say in how they are shared out, which is compliant with the new legislation
• Tronc can provide big savings to both staff and businesses through exempt National Insurance contributions
• The Tronc scheme should be non-partisan,  and run for the benefit of staff
• It can improve staff motivation, morale and retention as employees feel valued and rewarded

But presently, there is of course a discretionary and uneven element to the process overall. And one of the issues that can complicate tronc payments is when there is discretionary service added to the bill. Presently, this amount may be put through into salaries, rather than a separate gratuities distribution system. 

A different viewpoint

As an example. A group of friends enjoys a good meal in an Italian restaurant. The food is great, and service has been exemplary. The service charge is included in the bill. Nobody questions paying it, and in addition, nobody gives another thought as to how and when this will be shared out with staff. And they more than likely don’t think about the case as above where it is paid via salaries If this group understood that some or all of this was being withheld, they may have not walked away so satisfied.

And then there are the staff. Without the right governance in place, staff being short-changed on hard-earned tips and gratuities may not feel any sense of loyalty and the turnover for front-of-house is likely to be high.

For many staff on a lower income, tips and gratuities are often the difference between paying the rent or being left short and struggling to make ends meet. Which is why this new legislation to ensure fairness and transparency around tronc rules is so vital.

Changes to Tronc in 2024

In order to manage this better and to improve transparency and efficiency, new legislation has now been passed and we’re only months away from this becoming law.

A new legislation is coming into force whereby tips must be paid in full to staff and distributed fairly and looking to come into force in 2024.

The nuts and bolts of the new Tronc rules is that sharing out gratuities is no longer a choice or something that can be shifted subject to profit margins. A Tronc system must be fairly adhered to and the Troncmaster will have further responsibilities for the even distribution system of this money.

Consequences of rule-breaking

The gravity of non-compliance cannot be ignored. Businesses may face an employment tribunal and prosecution if there is a breach.

In order to be compliant, avoid legal ramifications, and keep staff fully engaged and in control of their tips, more and more hospitality businesses may decide to turn towards a robust tronc system. Or if they already have one, will ensure that it is running to the best of its abilities.

Food for thought for employers

The new governance presents a number of possible drawbacks for those pulling the hospitality and restaurant strings. There can be no holding back direct costs such as credit card charges, and the more a guest tips, the higher the outlay for the business. And of course, a decision must be reached on who pays the troncmaster and how much will they get for this extra responsibility? Also, you currently may have a more seasonal system for tip distribution, paying out according to the ebb and flow. The new law means that these payments have to be made monthly.

Our final tip for you – partner with the experts

Tips and service charge legislation is unavoidable and may mean some changes for your business. To ensure you’re ahead of the game from a hospitality or restaurant insurance perspective, why not have a chat (or ask any further questions) with the specialists on 0207 543 2807.