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In this guide, we’ll cover:
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What a tronc system is and how it works,
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The 2024 Tipping Act and the 2025 holiday-pay ruling – what’s changed and what hasn’t,
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The options available for setting up a tronc,
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Practical steps to stay compliant and efficient (including how Rotaready Evo, our AI-powered rota software, integrates with TiPJAR, the leading independent tronc and cashless tipping system).
What is tronc?
In the UK, a tronc refers to the system used to pool and distribute tips among employees. The tronc system is usually set up to ensure that all staff members, including those who may not typically receive tips directly, are compensated fairly.
Tronc systems are usually adopted by restaurants, bars, hotels and other hospitality businesses and, if set up and run correctly, do not attract employer National Insurance on tip distributions.
For many workers, tips are a major benefit of working in hospitality. By implementing a tronc scheme, businesses can:
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Distribute tips fairly and legally
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Give staff confidence they are receiving the correct amounts
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Reduce the risk of payroll or tax errors
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Demonstrate compliance with the Tipping Act’s record-keeping and transparency duties
Under the Employment (Allocation of Tips) Act, which took effect on 1 October 2024, tips are now categorised as either:
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Employer-received tips – for example, card payments processed by the business,
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Worker-received tips – typically cash given directly to staff.
Any tronc system should clearly set out how both types of tips are handled within the business to ensure compliance and transparency.
What is the new legislation regarding tips?
The Employment (Allocation of Tips) Act, which came into force on 1 October 2024, changed the way UK hospitality businesses handle tips, gratuities and service charges.
The law requires:
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100% of tips to be paid to staff in full, with no deductions allowed except those required by law, such as PAYE tax and (where applicable) National Insurance contributions,
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Payment must be distributed to staff no later than the end of the following month after the customer leaves the tip,
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Employers must maintain clear tipping records for at least three years and allow workers to request them once every three months,
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Employers to publish and communicate a tipping policy that is fair and transparent and have regard to the new Statutory Code of Practice on Fair and Transparent Distribution of Tips (approved July 2025).
A “qualifying tip” is any tip or service charge the employer receives or over which it has “significant influence”, regardless of whether it’s paid by card, cash or an app.
The legislation also gives employees the right to take cases to a tribunal if tips are unfairly withheld or mismanaged, meaning hospitality operators are under closer scrutiny than ever.
What kind of tronc scheme do I need?
There are a few options when it comes to setting up a tronc scheme that business operators should consider carefully to find the right solution for them.
Here are some of the most common ways businesses set up their tronc scheme:
1. In-house tronc scheme
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Managed internally, often with digital tools
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One or more Troncmaster(s) appointed for the management and distribution of tips to employees
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Under the legislation, the business (not the Troncmaster) is legally responsible for compliance
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Employer NIC becomes payable on that holiday-pay uplift, so total labour cost can rise by ~15%.
2. Third-party tronc scheme
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Outsourced to an external provider
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Offers expert compliance management and reduces admin
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Comes with added costs
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Independence from the employer helps preserve the NIC exemption and protects against holiday-pay claims. TiPJAR, the UK’s leading cashless tipping and automated tronc platform, follows this fully independent model and integrates directly with Rotaready Evo, sharing signed-off hours and staff data to automate tip allocation, reduce manual admin and maintain compliance.
3. Hybrid tronc scheme
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Combines in-house control with external expertise
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Works well if you already have strong rota/payroll systems but want independent oversight from a Troncmaster
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Popular where operators use workforce platforms like Rotaready Evo for data capture, paired with an independent provider for allocation and payout.
No matter which method you choose, the scheme must be fair and transparent, and team members should understand how tips are collected and distributed. Make sure your written policy meets the Tipping Act’s record-keeping duty (three-year retention) and references the 2025 Statutory Code of Practice on fair distribution.
How is tronc calculated?
So, how can employers calculate tronc fairly for their employees? Let’s look at some of the most popular ways:
1. Points-based system
A points-based system allows employers to award points to employees based on factors such as hours worked, job role and customer feedback which are then used to determine the percentage of tronc that each team member receives. The Statutory Code now stresses that any weighting factors must be objective, written down and available to staff on request.
2. Equal distribution
This is when the tronc is divided equally among all employees, regardless of job role or hours worked. This ensures that all employees receive an equal share of the tips but may not take into account differences in job responsibilities or performance.
3. Tiered system
This is when the tronc is divided into different tiers based on job role or level of responsibility. Employees in higher-tier roles may receive a larger share of the tronc, reflecting their greater level of responsibility and skill.
4. Performance-based system
This is when the tronc is distributed based on individual performance, such as customer feedback or sales targets. This method can help to incentivise employees to provide excellent service and reward those who perform well. Be careful: the Code states any performance metrics must be “clearly defined, measurable and within the worker’s control” to avoid disputes.
Regardless of the method chosen, it should be fair to all employees with clear rules and guidelines that are readily available to view for all members of staff, including temporary and agency staff. The chosen system should be reviewed and updated regularly to ensure it remains fair and appropriate.
Benefits of a tronc system
A tronc system is one of the best ways to ensure your business is distributing tips fairly among all employees, based on clear guidelines – and a third-party system can take a lot of the time and stress out of for you.
Here are some of the other business benefits of having a tronc system in place:
Increased transparency
A tronc system can provide greater transparency around tips, allowing employees to see how much they are earning and how tips are being distributed. This can help to build trust between employees and employers, meaning your employees will be happier to work for you – and likely stay with you longer too. From October 2024 workers can now request tip records once every three months, so a digital tronc makes meeting that legal duty trivial.
Compliance with legal requirements
A tronc system can help hospitality operators comply with the Employment (Allocation of Tips) Act, now in force across the UK. This reduces the risk of legal disputes and reputational damage.
Improved efficiency
A tronc system can automate many of the administrative tasks associated with collecting, distributing and reporting on tips. This can help to reduce the administrative burden on hospitality operators and improve efficiency.
Improved financial management
A compliant tronc system can provide greater control and visibility over tips, allowing hospitality operators to better manage their finances and make informed decisions about staffing levels and other business operations as well as preserve the National Insurance exemption, saving around 15%, provided the employer does not control the scheme.
Reduced holiday-pay liabilities (new for 2025)
If you’re paying tronc through your company payroll, it starts to look like “wages” when holiday pay is calculated. That could create new liabilities for employers who have been running tronc in this way.
7 top tips for setting up a tronc system
To help you ensure compliance with tipping legislation and guarantee fair tip distribution, we’ve collaborated with TiPJAR on some top tips to help you set up a compliant and effective tronc scheme:
1. Choose a Troncmaster
One of the first decisions you will need to make is who will be responsible for managing your tronc system. This person is known as the Troncmaster. You can choose to assign this role to an employee or hire a third-party provider.
There are pros and cons to both approaches. Assigning an employee can save costs, but they may not have the necessary skills or experience, and, crucially, the appointed person must be able to act completely independently from management, with no hiring or payroll authority, to ensure compliance and preserve key tax exemptions. On the other hand, a third-party provider can offer expertise and experience, but at a higher cost. Ultimately, you will need to choose the option that works best for your business.
Remember that the troncmaster must operate a PAYE scheme in their own name and keep the employer at arm’s length; unless tronc payments are taxed through the employer’s payroll, in which case the employer becomes liable for PAYE and National Insurance on those tips.
2. Create a tips and troncs policy document
To ensure that your tronc scheme is fair and transparent, it is important to create a tips and troncs policy document. This should include guidelines for collecting, distributing and reporting on tips, as well as any fees or deductions.
Make sure that all employees are aware of this document and can refer to it as needed.
3. Involve employees
Tips are a significant benefit of working in the hospitality industry and many workers receive them in addition to their income, so their input absolutely matters when it comes to deciding what’s fair.
Listen to your teams and consider their opinions, especially from the front-of-house teams whose service has the most impact on tips. Remember that if staff perceive tips to be unfairly distributed, you may well see a negative impact on customer service as they feel demotivated. Consultation with staff is also a best-practice expectation in the 2025 Code.
4. Keep accurate records
The new legislation gives your teams the right to request information regarding the total tips collected and their personal allocation once every three months. You must keep those records for at least three years.
5. Check your current rota software
Your current rota software may be able to help you calculate tronc fairly. Many software solutions offer tronc-calculation features, which can help you distribute tips more accurately and efficiently.
Rotaready Evo, for example, exports approved hours directly into TiPJAR or other independent troncs, removing manual data entry and boosting audit accuracy.
6. Check compliance with legislation
Finally, check that your tronc system is compliant with current and upcoming legislation. This includes the Employment (Allocation of Tips) Act, which requires employers to ensure that all tips are paid to workers in full.
If tips pass through the employer’s payroll, the 2025 Palanki v Big Table Group ruling means average tronc earnings must now be included in statutory holiday pay, potentially adding 15% employer NIC on the uplift.
7. Fair Dispute Resolution Mechanism
Establish a fair and transparent process for resolving disputes related to tip distribution. Ensure that employees have a mechanism for raising concerns and that these are addressed promptly and fairly.
How TiPJAR and Rotaready Evo help you run a fair, fully compliant tronc
“At TiPJAR, compliance and fairness have always been at the heart of what we do. Our integration with Rotaready Evo means operators can now automate tronc management directly from their rota, removing admin, improving accuracy, and ensuring every penny goes where it should.
By operating through an independent tronc master, our customers stay fully compliant with the Employment (Allocation of Tips) Act, remain exempt from NICs, and avoid any confusion with wages. It’s a model built on independence, transparency, and trust, exactly what the industry needs.”
Dan Hawkie, CCO TiPJAR
In this article, we’ve looked at what tronc is, how it’s calculated, the benefits for businesses and employees, and practical steps for setting up your own scheme.
A well-designed tronc keeps tips transparent, boosts staff morale and protects you under the Employment (Allocation of Tips) Act. TiPJAR and Rotaready work hand-in-hand to deliver exactly that:
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Independent, HMRC-cleared tronc – TiPJAR’s SuperTronc™ ring-fences tips, runs its own PAYE scheme and automates daily or weekly splits, so employers avoid NIC costs and holiday-pay liabilities.
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Zero admin sync with your rota – Signed off hours are pulled straight from Rotaready Evo into TiPJAR , guaranteeing allocations match who actually worked each shift and creating an audit trail for the three-year record-keeping duty.
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Real-time visibility for your employees – team members can see their tip balance grow and download allocation reports whenever they wish, meeting the Act’s “right to request” requirement.
FREE resource: Download our 8-step Tronc Audit Checklist to benchmark your scheme in 10 minutes.
Whether you’re planning to handle tronc in-house or would like third-party provider support, we have the solution for you.
Ready to stress-test your current setup? Book a demo consultation today.
