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Copy linkThe fair and cost-effective way to distribute tips and gratuities
Updated 6th June 2025 | 7 min read Published 5th October 2023
Your staff work hard and when your customers appreciate them with a tip or service charge, they deserve to receive a fair share of this.
A tronc scheme can help you deliver this. It is a win, win for you and your employees as it saves National Insurance tax for both, potentially saving thousands for your business and ensuring the maximium amount ends up in your employees’ pockets.
What is a tronc scheme?
A tronc is a tax scheme designed to evenly distribute pooled tips and service charges from customers to employees. Troncs are increasingly common due to the shift from cash to card payments and digital tipping. However, when tips are deposited into the business account, they put be processed through payroll, this poses challenges for fair distribution.
While the straightforward approach might involve adding tips to employees pay, this subjects the tip amount to taxation and national insurance contributions.
A properly structured trounce scheme can ensure that tips are still distributed to employees through their payroll but without incurring National Insurance deductions or National Insurance payments for the employer.
Discover the best tronc option for you
We can take on the compliance and administrative burden of running a tronc scheme. Acting as your Troncmaster we will work with you and your employees to help establish the best tronc scheme structure for you. We then take on the administration for your tronc, calculating how your tips and service charges should be distributed each pay period. We have range of HMRC compliant tronc options to suit your needs.
We then take on the administration for your tronc, calculating how your tips and service charges should be distributed each pay period. We have range of HMRC compliant tronc options to suit your needs.
Our Troncmaster Services
Tronc + Payroll
We act as Troncmaster and manage your tronc and dovetail that with also managing the payroll on your behalf.
Tronc Lite
We act as the Troncmaster with payments made through your existing PAYE scheme.
Managed Tronc
We act as Troncmaster with a separate PAYE scheme, registered with HMRC.
Benefits of a Tronc Scheme
A compliant tronc scheme ensures your employees receive their fair share of tips without undue costs for the business. A proper;y set up and administered tronc scheme not only saves money, it also improves employee trust in you as an ethical and fair employer.
The new Tips Bill, likely to come into force in April 2024, is bringing in new legislation about how business should distribute tips and communicate with employees. A tronc scheme can play a huge part in ensuring you are ready for the changes this new legislation will bring.
Savings for the business
Saving 13.8% in Employers’ National Insurance could result in many £1000’s in savings over the course of a year
More tips for staff
Tips paid through a tronc scheme avoid the 12% National Insurance tax applied to wages, so goes to your employee
Recruitment & retention
When staff know they are being treated fairly, it can only be a good thing for recruiting and keeping your team
Peace of mind compliance
Tronc schemes can be and is a challenging role for an internal Troncmaster, let us take away the pressure as your Troncmaster
Tronc scheme FAQs
We know you are sure to have lots of questions about tronc schemes, so let us help you answer the most common queries
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A tronc scheme is a special pay arrangement that lets business who take tips, gratuities and service charges from customers, distribute these to staff in a fair and cost effective way.
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Why does there need to be Troncmaster?
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A Troncmaster must be someone who is independent of the business owners or senior/hiring team. This is one of the most common areas where businesses get it wrong, as they may appoint a senior team member or HR person as Troncmaster, but if they have any hiring responsibilities this will make the tronc scheme non-compliant and open to HMRC penalties
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As tips distributed through a tronc scheme, attract no National insurance, the business saves 13.8% on Employers’ NI and the employees save 12% Employees’ NI.
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Tronc allocated by an independent Troncmaster can be processed via the Employer’s PAYE scheme, however a separate scheme would be necessary if the tronc funds are paid from a separate bank account. This can cause confusion for employees however, so we usually recommend using the one PAYE
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Tips must be pooled tips, not direct tips to individuals, and must be discretionary for the customer. So service charges added to the bill can be included, but only if the customer has the option of removing.
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You don’t have to use a tronc scheme, and if you don’t pool your tips but they are given directly to individuals, then a tronc scheme isn’t necessary. But without a tronc scheme, tips will be subject to National insurance for the employee and if they go through the businesses’ bank account, then NI for the employer too.
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With so many challenges facing hospitality businesses and their staff, having the responsibilities of running a tronc scheme can become overwhelming for a staff member. Not only do they need to decide on fair tips distribution model, they will have to calculate the amends every pay period and keep meticulous records. If that member of staff leaves or no longer wishes to take on the role, you will need to find an alternative pronto. With an independent Troncmaster, they have a tea, of people, plus the tech to carry out the tronc administration. And, because it is what they do every day, they are knowledgeable and efficient.
