With new legislation landing in 2024 to ensure fairness and transparency, discover what it all means and the implications for employers and their staff.
Tronc payments – what are they?
A tronc is a method whereby workers receive a fair and proportionate share of any tips, gratuities, and service charges that are a reward for good service.
Right now, an estimated 150,000 hospitality businesses use a tronc system.
To make sure that the payments remain fair and everyone gets their share, a troncmaster is put in place, who should make sure the tipping process is free of bias and runs democratically. This is not just for the bean counters, as a deep knowledge of both the income tax process and PAYE is essential in order to perform this role well. Many companies therefore take the decision to hand the troncmaster role and responsibilities to an outside resource who deals specifically with tronc systems. This ensures all the financials and legalities are in the right hands, and also maintains a good level of impartiality.
Advantages of the tronc system
When a tronc scheme is well-run, the advantages are abundant for workers. Together, they could earn as much as 100 per cent of tips, and as long as it’s in line with the new laws, have a say in how it’s shared out. And as it’s exempt from National Insurance, there are significant savings to be had for both staff and the actual business.
On a more holistic level, tronc can be great for morale and retention, as those who stand to gain feel properly rewarded for their hard work. It can also serve as a form of grass roots workers’ rights if it follows non-partisan guidelines and is authentically run for the benefit of the staff and not the management.
Until the laws are formally passed in 2024, many workers have to deal with a more uneven tronc process. A typical stumbling block to tronc working effectively is when discretionary service is added to the bill. This may well be transferred into salaries, rather than a separate gratuities distribution system – which will all change once tronc rules formally come into play.
Why tronc makes a difference
If you go for a meal in a gastro pub, whether the meal and service is good or not so good, the service charge is often added on automatically. This has become such a way of life you may not even question it or consider how it gets shared out.
For the staff, without fair management of tip divisions, they could end up short-changed and, as a result, be short on loyalty to their employer.
If you’re not a high earner, tips and gratuities could even be the tipping point between paying the rent or being low on funds.
If ever there was a case for new legislation to ensure fairness around tronc rules, it would be the above.
What are the new laws around tronc?
New legislation has been passed and is shortly to become law, ensuring all tips and gratuities are distributed fairly and in full to staff.
The new tronc legislation for 2024 rules means that tip distribution isn’t a choice, and can’t fluctuate according to profit and loss. Not only are tronc systems going to be more visible and completely transparent, but there will be additional troncmaster duties to ensure this remains compliant.
Break the rules, pay the price
It’s simple – those who don’t play fair may well find themselves in front of employment tribunals and facing prosecution. For those that adhere to the tronc law rules and regulations, you’re likely to see a more dedicated and loyal workforce. Even for those businesses that already have a tronc system in place, now is the time to ensure you’re match-ready for 2024.
Extra considerations for employers
If you’re a business owner or manager, note that direct costs such as credit card charges can’t be held back, and also the bigger the tip, the higher the outlay for you. Bear in mind fluctuations to how busy you are as well – any seasonal schemes will need to be replaced with a set monthly format of pay. There’s also the choice of who gets to play troncmaster and how much extra you’re able to pay someone to take on the role.
The new tronc legislation will be here soon, so our final and most important ‘tip’ is to make sure your Hospitality Insurance is up to scratch, leaving no room for error.
This article comes courtesy of Howden – an expert group who do insurance differently – offering flexible, high-quality cover and reassuringly straightforward service, while using insurance as a tool to increase resilience. United by a no-limits mindset, we’re a powerful and passionate team, rising to any challenge to do right by your business.