Dealing with cash tips, service charges, and Tronc has become a real concern for many restaurant and hospitality operators now that tipping practices are back in the spotlight.
Customers typically pay a 12.5% gratuity on their bills to thank the employees who served them, but those employees are frequently disappointed by the reality. In addition, according to various reports, the number of employers who unjustly reap the benefits show no signs of slowing down.
So, what’s the answer? How can the hospitality, leisure, and service industries distribute tips in a fair and transparent manner? Many businesses choose to distribute gratuities by including them in their regular payroll. However, there is a catch: the tip money is frequently taxed as salary, meaning the employees receive it net of income tax and NI contributions (NICs).
In an industry that can be hard to work in, and often experiences high turnover, this will usually make a job that pays in this way far less appealing to top hospitality talent. So, enter troncs, an alternative option that benefits everyone.
A tronc is a special pay arrangement that is used to distribute customer tips, gratuities, and voluntary service charges to employees. The term comes from the French phrase “tronc des pauvres,” or “collection box,” which was used to collect donations for the poor in the 1920s.
What is a Troncmaster?
A troncmaster is the person in charge of coordinating the distribution of tips, gratuities, and voluntary service charges given by customers to employees.
The troncmaster must not be the proprietor, a partner, or another company official to ensure that tips are not subject to NICs. Furthermore, employers must not decide or participate in tip distribution. The total cost of employer and employee NICs is over 25%, so this represents a significant savings that can be passed on to employees’ take-home pay.
Why Tronc Makes Sense
The benefits of having a tronc are straightforward:
- Staff can own up to 100 percent of their hard-earned tips and have a say in how they are distributed between front and back of house personnel.
- The arrangement can be truly self-contained, free of employer interference and influence, and operated for the benefit of employees.
- Formal rules governing the allocation and distribution of service charges are available to employees and customers, so that everyone understands where every penny tipped is really going. Surveys have shown that sometimes customers withhold gratuities because they are not sure that they are really going to the staff that served them.
There is a growing demand for troncmasters who are not employees of the company and thus cannot be influenced by their boss. Businesses value someone who is up to date on tronc rules and acts fairly and ethically – without bias, partiality, or personal friendships or motivations getting in the way.
As independent troncmasters, we assist our hospitality clients in forming trusting relationships with their employees and customers. Our troncs are completely transparent, comply with all HMRC requirements, provide NIC exemption, and save employers and employees money. Each position is unique and designed to help our clients recruit, motivate, and incentivize their employees.
If you prefer to appoint an in-house troncmaster we can help there too, ensuring that a fair and compliant system is set in place.