Understanding TRONC 2024: Everything your hospitality business needs to know about tips
From October 1st, 2024, the Employment (Allocation of Tips) Act 2023 – the “Tipping Act” came into full effect across the UK. This law brings major changes to how tips, gratuities, and service charges must be handled in hospitality businesses.
The hospitality sector relies heavily on tips and gratuities, which play a significant role in workers’ incomes and motivation. The Tronc system is used as a transparent means for the fair collection and distribution of tips amongst staff. However, the recent change in legislation means that hospitality businesses need to know how to update their practices to be in line with the new rules on tip allocation and payroll compliance.
What is TRONC:
‘Tronc’ comes from the French term ‘Tronc des pauvres’ which directly translates to ‘poor box’. Historically this was used as a function for donations but in contemporary practice it is the electronic and administrative system to fairly distribute tips to all employees who contribute to the customer – whether they’re front or back of house.
The most important change is that now 100% of all tips, service charges and gratuities go directly to the employee who earned them. Previously, some employers would hang onto 20-30% of these funds for the cost of administration fees, taxes or business expenses, but this is no longer permitted.
These tips are required to be paid out by the end of the month (following the month that they were received by the business). This puts an end to the practice of holding back payments. Furthermore, they must be distributed to the staff that work at the same place of business – meaning that there cannot be any cross-location tip pooling. It is also imperative that there is complete transparency detailing the funds available to staff and the timings on when those funds will be available to them. If this is not made clear to workers and they believe tips or records have been unfairly withheld, they have the right to challenge their employer through the Employment Tribunal.
Overall, these new changes aim to ensure fairness, transparency and timely compensation for hospitality staff while protecting consumer trust and business reputation. However, it does come with new compliance responsibilities for employers.
Impact on payroll and compliance:
The Tronc 2024 legislation has a crucial effect on payroll processes for the hospitality industry. Previously it was perfectly normal and acceptable for employers to deduct National Insurance Contributions (NIC’s) and other costs from the tips pool but now everything must be passed on directly to staff. This means that employers need to adjust the payroll systems to reflect this distribution clearly and accurately ensure that tips are processed through PAYE with the correct tax and NIC treatment – even though NICs are not charged on tips through a compliant TRONC scheme, the record keeping and compliance requirements have increased.
To do this correctly, payroll must maintain a detailed record of the distribution of tips for at least three years. Failing to do so, employers can be held accountable to financial penalties, compensation payouts and damage to business reputation through potential tribunal claims.
In addition, there must be training for payroll management teams on new Tronc regulations so that everyone understands how tips are collected, recorded, and paid out fairly. Many businesses may also need to collaborate closely with accountants or third-party Tronc scheme providers to ensure compliance and financial accuracy under the new framework.
The new Tronc system rules are more than just an administrative update, they represent a fundamental shift in how hospitality businesses handle tips and gratuities. Getting it wrong could risk compliance issues, payroll errors, and staff dissatisfaction.
How Moore South can help you
Contact Moore South to speak to our business tax and payroll team today to review your current Tronc arrangements. We’ll ensure your system is fully compliant, transparent, and tailored to your business giving you confidence and peace of mind.