How much could your hospitality business save with a tronc?

A tronc is a separate organised arrangement for distributing tips, gratuities and service charges. To qualify for the NIC exemption under HMRC E24 rules, the tronc must be operated by an independent troncmaster who decides how tips are allocated, pooled, and distributed without any direction from the employer. The troncmaster is typically a senior employee (head waiter, supervisor) or an external specialist provider. The tronc has its own PAYE scheme separate from the main payroll. Income tax still applies but NIC does not.

On every £1,000 of tips paid through a properly structured tronc instead of regular payroll, you save the 15% Employer NIC (£150) plus the 8% Employee NIC (£80), a combined £230 of National Insurance per £1,000. For a restaurant processing £100,000 of card tips per year, that is £23,000 of pure cash saving annually with no impact on what staff take home. The £1,500 typical setup and ongoing running cost recovers in the first month.

Yes, but it strengthens the case for tronc rather than weakening it. From 1 October 2024, employers must pass on 100% of tips to workers, allocate them fairly under a written tip policy, and keep records for 3 years that workers can request. Tronc schemes naturally satisfy these requirements because the troncmaster runs the allocation independently. We provide a tronc + Allocation of Tips Act compliance pack as part of our Hospitality Plus service: written tip policy, tronc agreement, payroll setup and ongoing administration.

No, the opposite. Tronc-allocated tips are NIC-free for the employee, so a basic-rate waiter receiving £5,000 of tips through tronc takes home around £4,000 (income tax only) versus around £3,600 if processed as regular payroll wages. The £400 NIC saving per year per employee is real take-home money. Combined with the employer NIC saving, tronc creates a genuine win-win for both sides.

Yes. Card tips, mandatory service charges and discretionary cash tips can all be processed through a tronc, provided the troncmaster (not the employer) decides allocation. The Allocation of Tips Act 2024 specifically covers all forms of tips including card payments. Your card processor pays the gross tip amount to the business, you transfer it to the tronc account, and the troncmaster allocates it. Income tax applies, NIC does not.

There are five steps: 1) Appoint an independent troncmaster (employee or external). 2) Draft a written tronc agreement and tip allocation policy. 3) Register a separate PAYE scheme for the tronc with HMRC. 4) Set up a tronc bank account or accounting code separate from main business. 5) Run monthly tronc payroll, file RTI submissions, distribute. We handle the full setup and run the tronc payroll ongoing as part of Hospitality Plus from £200 per month for a single-site venue. Your annual NIC saving typically pays the fee 5x to 20x over.