The dark side of troncs and their masters

Ir ecently published an article on MP Dean Russell’s private bill to change the law on tipping (see below), sparking an in-depth and engaging conversation with my colleagues Tamara Ludlow and Julia Weall on the contentious nature of troncs and troncmasters.

If you are not already aware, a tronc is a payment system that distributes tips, gratuities, and service charges among employees. The system is operated by a troncmaster whose duty it is to split the money as well as  reporting to HMRC.  Needless to say, effective management of the tronc is entirely dependent on the relationship between the employer and its troncmaster and, as you’ve probably guessed, this is where the issues arise.

Tamara is co-head of the SMB’s employment department and has been in practice for over 20 years.   Prior to joining SMB, Julia was a key player in Harvey Nichol’s in-house legal team and both have a wealth of experience in dealing with troncs and troncmasters.  Between us we outline some of the key issues with running a tronc.

Unscrupulous employers who manipulate  the system and reduce tips claiming it to be an administration charge;

Cashless world tips made via EPOS go directly to the employer’s bank account with no guarantee that tips are paid to staff;

Untrained troncmasters can really mess up the tax position. If tips are not paid directly or indirectly to staff but pooled and then shared, it will be exempt from NICs;

Cooking the books in order to tip skim or reduce staff tax liability so as to not alert HMRC to such fraudulent activity.

It is no wonder that the law is changing on this under appreciated yet highly contentious area of payroll activities. Enter MP Dean Russell’s private bill: Employment (Allocation of Tips) Bill. If enacted, the legislation will compel employers to allocate 100% of qualifying tips, gratuities, and service charges to their staff free from deductions  (save for tax and national insurance) which are arbitrarily applied.

If you are a business setting up a tronc system and need advice, SMB are happy to help please contact me at joe.hennessy@smb.london to discuss further in setting up an ethical tronc system which is compliant with incoming legislation.