Tips and Tronc: Are you maximising the tronc scheme to full efficiency?
Tips are seen as a massive employment benefit of choosing employment in hospitality. In an industry that has lots of minimum wage employees, tips supplement wages and are a huge motivating factor in providing excellent service – after all, happier guests generally means bigger tips!
But managing, distributing and calculating tips fairly can be challenging for operators. Research in 2022 by Iris Software Group reported that more than 1.2 million hospitality staff in the UK are paying too much National Insurance on their tips.
And with upcoming updates to legislation surrounding tips and tronc systems, there’s never been a better time to review your current procedures and make sure you’re managing tips fairly in your business. With a full suite of software products that support people, payroll and rota processes in hospitality businesses, we’re taking a look at what a tronc scheme is, what the new legislation will mean for operators and how you can set up an HMRC-compliant tronc system for your business.
What is tronc?
In the UK, 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 also ensure compliance with National Insurance requirements.
Tips are often seen as a major benefit of working in the hospitality sector, so by implementing a tronc scheme, businesses can ensure that tips are distributed fairly and legally and in turn benefit staff who can be assured that they receive the fair amount of tips they are owed.
The new legislation impacting tips categorises tips as either employer-received (such as card payments) or worker-received (typically cash) and any tronc system should clearly state how any tips are handled within the business.
What is the new legislation regarding tips?
The new legislation affecting the way tips and tronc are handled is outlined in the UK Employment (Allocation of Tips) Bill 2022-23 and is set to come into force from the 1st July 2024. Primarily focusing on the fair distribution of tips, gratuities and service charges, the legislation will ensure that tips are paid in full to staff no later than the end of the month following the month in which they were paid by customers.
The bill provides employees with the right to request tipping records and to take employers to a tribunal if they feel tips have been withheld. The legislation will also aim to prevent employers from using tips to top up workers' wages to meet minimum wage requirements.
In addition, the legislation will offer recommendations to businesses on communicating and displaying their tip policy clearly. The aim is to increase transparency and fairness in the distribution of tips and protect the rights of workers.
With the new legislation now set to come into effect on the 1st July 2024 and with the hospitality sector expected to be under scrutiny, operators will need to ensure transparency in their tipping practices to avoid legal issues and negative publicity.
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:
- In-house tronc scheme: Many businesses choose to manage their tronc scheme internally, often employing a digital solution and appointing one, or even several, Troncmasters who are responsible for the management and distribution of tops to employees. It's worth noting that under the new legislation, it clearly states that businesses will be responsible for non-compliance rather than Troncmasters.
- Third-party tronc scheme: This is when the business hires an external third-party provider to manage the tronc system on its behalf. This offers a significant advantage in terms of time and offers some security in ensuring that legislation is followed correctly but can come at a cost.
- Hybrid tronc scheme: A combination of an in-house and third-party scheme. For operators who have a robust rota or payroll system in place that helps them manage and distribute tips they may well just want the expertise of an external Troncmaster to ensure everything is managed fairly and all in line with legal obligations and requirements.
No matter which method businesses opt for, it’s important to ensure the tronc scheme is fair and transparent, and that your team members are aware of how tips are collected and distributed. And it’s also essential that your scheme complies with all legal requirements regarding the distribution of tips and gratuities.
How is tronc calculated?
So, how can employers calculate tronc fairly for their employees? Let’s look at some of the most popular ways:
- 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.
- 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.
- 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.
- 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 rewards those who perform well.
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.
- Compliance with legal requirements: A tronc system can help hospitality operators to ensure compliance with legal requirements around tips, such as the upcoming Employment (Allocation of Tips) Bill in the UK. This can help to reduce 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 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 save on NI contributions.
Top tips for setting up a tronc system
As providers of a range of hospitality HR, payroll and rota software, we here at Access have a few top tips when it comes to setting up a tronc system:
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 to manage the system effectively. 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.
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.
Involve employees – Tips are a significant benefit of working in the hospitality industry and many workers come to rely on them as part of their income, so their input absolutely matters when it comes down 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.
Keep accurate records – The new legislation will give your teams the right to request information from their employers regarding total tips collected and their allocation in regard to themselves. Although there isn’t specific guidance on how far back your records should go, our experts recommended keeping records for at least three years.
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. Check with your software provider to see if this is an option for your business.
Check compliance with legislation - Finally, it is important to check that your tronc system is compliant with current and upcoming legislation. This includes the Employment (Allocation of Tips) Bill, which will require employers to ensure that all tips are paid to workers in full. Make sure that your tronc system is set up to comply with this legislation, and that you are keeping accurate records of all tips collected and distributed.
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 Access can help you with fair tip distribution and tronc schemes
Here at Access Hospitality, we offer a range of payroll and scheduling software that can help hospitality businesses manage tips and tronc. Including tools that can help to automate the tronc process, calculate tronc fairly and support the Troncmaster in distributing tronc.
Our tronc management solution allows businesses to create and manage their own tronc scheme in-house, with full control over how tips are collected, distributed and reported with the ability to set your own tronc period so you can manage whether tronc is paid weekly or monthly. The software includes a range of features, such as automatic tip distribution, compliance with legal requirements and real-time reporting and analytics. The software can also help operators ensure compliance with upcoming legislation and create a tips and troncs policy document for staff to refer to. Additionally, we have software that can integrate with existing rota software, making it easier for operators to manage tronc alongside staff scheduling.
Whether you’re planning to handle tronc in-house or would like third-party provider support, Access Hospitality has the solution for you. Talk to the team today to find out more about our Access People solutions.
Check out our Tips and Tronc Legislation Q&A from our recent webinar with some of the sector’s leading experts on the new legislation and what it means for businesses.
