A tronc is a separate pay arrangement run by an independent troncmaster to distribute tips and service charges to staff. Where the troncmaster genuinely controls allocation without any employer involvement, both employer and employee National Insurance contributions are eliminated on those distributions. Getting the independence condition right matters: any employer involvement in deciding who receives what destroys the NIC saving and exposes the business to historic NIC liabilities and HMRC enquiry. Income tax via PAYE still applies on every tronc payment.
HMRC's National Insurance Manual (NIM02922) is clear: the NIC exemption applies only where the troncmaster genuinely controls who receives what, and the employer plays no part in allocation. Appointing a head chef or manager who follows the owner's instructions destroys the saving. The appointment, the allocation method and the ongoing governance must all hold up under scrutiny.
The Employment (Allocation of Tips) Act 2023, in force since 1 October 2024, requires operators to pass 100% of qualifying tips to workers without deductions, to allocate them fairly under the statutory Code of Practice, and to hold a written tips policy. A tronc scheme must be designed to satisfy both the HMRC independence requirement and the Tips Act obligations simultaneously.
Employer top-up payments to supplement tronc distributions are contractual earnings, not tips or gratuities, and are subject to employer and employee NIC in the normal way (NIM02935). A scheme that conflates tronc distributions with employer top-ups will be treated as earnings for NIC purposes.
Tips, gratuities and tronc payments of any kind cannot be used to bring workers up to the National Living Wage or National Minimum Wage. The NLW is £12.71 per hour for workers aged 21 and over from 1 April 2026. A business that relies on tips to meet this floor is breaking the law, regardless of how the tronc is structured.
We design a tronc scheme with the correct troncmaster structure, allocation rules and documentation to satisfy HMRC's independence requirement (NIM02922), the Tips Act 2023 statutory Code of Practice, and the written-policy obligation. The scheme is built for long-term scrutiny, not just initial setup.
We handle HMRC notification of the tronc arrangement, advise on the PAYE reporting obligations for tronc distributions and integrate the scheme into your existing payroll process. Income tax on tronc payments is reported via RTI alongside the main pay run.
We support the troncmaster with period-by-period allocation records, distribution payslips and reconciliation. For operators who also use our <a href="/services/hospitality-payroll">hospitality payroll service</a>, tronc and main payroll are processed together without duplication.
Tell us about your hospitality business and we will reply within 24 hours. No obligation.