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A tronc is an arrangement that is sometimes used to distribute tips, service charges and gratuities among employees. They’re typically used in work settings where tipping is common, such as a restaurant, hotel or bar.

When tips are pooled together and shared equally amongst staff members, the person who controls the tronc, known as a troncmaster, is required to set up and run a payroll, as well as reporting the information to HMRC. HMRC must know who the troncmaster is, so that they can set up a PAYE scheme for the tronc. 

How does a tronc work?

Troncs are pretty straightforward to set up and implement. They work in the following way:

  1. Troncs are a means of collecting tips from happy customers. When a customer gives a tip via card payment or cheque, the tronc will hold the money in a pooled common fund. 
  2. Then, the appointed troncmaster will be responsible for collecting the tronc and distributing the tips equally among all staff members.
  3. The troncmaster is also required to set up a PAYE scheme and deduct Income Tax before making the payment. However, this method does mean that employees might not have to pay NI contributions

Why use a tronc?

One of the main reasons that businesses use a tronc is because it is a fair and transparent way of managing employee tips. It means that everyone gets a share of the gratuity, not just the individual waiter or receptionist. This can inadvertently increase staff retention, and promote high levels of service.

Tips collected via a tronc can sometimes be exempt from National Insurance contributions. If a company gives a tip to an employee, they then become responsible for any NI contributions that need to be paid. This means the individual staff members get the full tip amount. They then won’t have to declare and pay PAYE tax on their additional income to HMRC directly.

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