Table of Contents
Tips are one of the biggest benefits of working in the hospitality industry, but historically they have not always been distributed fairly.
Legislation that came into force last week will mean that all tips will have to be given to employees on a monthly basis.
It has been welcomed with open arms by many, but it will also have an impact on a widely used system for gathering advice from staff that most people outside the hospitality industry will probably never have heard of: Tronc
The tronc system is a separate fund for tips and service charges and has traditionally been used to supplement staff salaries, especially during quieter periods.
More changes: New rules mean hospitality staff will receive 100% of their tips from customers
The new rules mean that, by law, staff must receive 100 per cent of all money paid through tips.
The Employment (Allocation of Tips) Act and mandatory Code of Practice require employers to “pass on all tips, gratuities and service charges to workers, without deductions”.
The code of practice says: “The Tips Act states that employers must ensure that all tips are distributed to staff by the end of the month following the month in which customers pay tips at the latest.”
If an employer breaks the law and keeps tips, a worker can bring a claim to an employment tribunal.
The new measures apply to all sectors in England, Scotland and Wales, but not in Northern Ireland, where employment policy has devolved and similar rules are being consulted.
But below we explain what this means for employee income, what tronc is and how it will be affected.
What is tronc and what happens to tips?
Tronc is a system that operates in the hospitality industry to group and distribute tips among staff.
It is usually used to set aside some tips to smooth out earnings over the year and also reward staff who work year-round, not just during peak seasons, and those who work in roles that are often non-tipped.
It has helped supplement the wages of salaried employees, as well as those with lower hourly wages.
If you leave a cash tip that night, in addition to any additional charges on your bill, restaurants will often give it to the waiter that night.
However, the service charge that is normally paid by card will go to the trunk in many places.
Crucially, the tronc is kept separate from the restaurant’s income and the staff would generally get a share of it.
Often a member of staff or an outside company will manage it as a “master tronc” and distribute the cash to employees.
The decline in cash usage means that troncs have become more common in the industry. With that, their use has changed and some employees choose to use them not only to pay tips, but also to cover staff parties, breakages and pay an external trunk master.
Tronc: How will companies cope in the quiet months?
One of the most common uses of tronc has been to smooth out the hotel sector’s notoriously sporadic revenues.
During busier periods, such as Christmas, the tronc is filled and a portion is distributed during the following, quieter months, to subsidize the salaries of those who work.
Generally, hospitality salaries are made up of a salary or hourly rate and a bit of wages.
As the hospitality industry struggled during the pandemic, more businesses added a discretionary service charge to bills, meaning thousands of pounds generated for tronc.
Some companies also offered a ‘guaranteed trunk’, usually for salaried staff, while the part of the trunk for hourly staff operates on a points-based system.
However, some in the industry think the system was open to abuse.
Dan Hawkie, trading director at Tronc Master TipJar, said: “There were obviously traders who needed a lot more from the Tronc pool and probably more than the client expected.”
‘A normal customer expects a service charge or tip to go to team members, not business accounts.
“The operators were able to do what they wanted because it was not regulated, which is why it has been necessary to implement all this legislation.”
Service charge: Tronc usually comes from charges added to invoices and distributed among staff.
The new tipping rules are expected to level the playing field, but are also likely to impact some businesses that operate tronc.
Tips now must be paid within the next calendar month, meaning businesses can no longer pay charges for services that help keep them going through quieter periods.
Hawkie says: ‘That’s one of the big contentious issues. However, if you had received a cash tip 10 or 15 years ago, you wouldn’t expect it to come into the business to hold onto for two or three months. If you earned a cash tip in the past, you’d probably take it home at the end of the shift.
‘The smoothing out of quieter periods is one of those areas that businesses are concerned about, but ultimately that’s where financial wellbeing can be deployed to support education and say, “You will receive extraordinary pay packages in our busy months, But please don’t spend it all.” “.”
However, that type of money management isn’t easy for many and won’t be of much comfort to minimum wage staff who rely on tips to supplement their income consistently year-round.
The new rules could also affect staff retention during quieter periods, meaning there will be a drop in staffing levels during January and February, before it picks up over the summer and Christmas again.
‘Winners and losers’ under new tipping legislation
There are many ways to operate a hotel business and that also applies to how tips are distributed among staff.
This makes any legislation that imposes a blanket standard across an entire sector difficult to enforce.
The new rules state that all tips must be given and specify a deadline, but do not specify how they should be distributed.
This leaves many questions unanswered: Should only front desk staff receive tips? Should access be guaranteed for kitchen staff? How should tips be shared between waiters, chefs, kitchen porters, etc.?
Kate Nicholls, chief executive of trade body UKHospitality, said the changes “will formalize what is already common in the sector, as businesses have been preparing for this legislation for a number of years”.
While this might be the case for larger companies, smaller companies might have difficulty adopting tronc changes.
While Hawkie anticipates that the new rules will not affect some operators, there are a “substantial number… who will have to do something very different.”
It is of no use that the new rules only briefly mention tronc, saying that employers who opt for an independent tronc operator must adopt a framework “in line with the principles of fairness”.
Guaranteed tronc schemes will not be banned by the new legislation, but Hawkie says they are likely to be frowned upon.
‘There have been operators in the past who could have paid a salary of £35,000 to a manager and guaranteed £35,000 in tronc.
“They won’t be able to do that anymore because another member of the team would see that the coach earns much more.” Under the transparency aspect of the new legislation that will obviously cause some conflict.”
Could the new rules cause prices to increase?
TipJar says they have seen more companies ditch a secured tronc and evaluate how they might need to reshape their finances.
That could even mean a reduction or complete elimination of the standard service charge and an increase in prices, with all other tips going directly to the staff.
TipJar said: ‘Traders who have done well in the past will probably be better off. They won’t need to increase their prices as much, nor will they need to increase their salaries because their teams will continue to benefit from the full 100 percent trunk payment month to month.’
The removal of the service charge could also affect non-customer-facing roles, such as chefs and kitchen porters, who may previously have had a share of the tronc.
When a company has set aside funds and put them into the business, there could be an opportunity for the money to be redeployed.
SAVE MONEY, MAKE MONEY
Investment boost
Investment boost
5.09% on cash for Isa investors
5.05% solution after one year
5.05% solution after one year
Prosperous momentum for Al Rayan
free share offer
free share offer
No account fee and free stock trading
4.84% cash Isa
4.84% cash Isa
Flexible Isa now accepting transfers
Trading Fee Refund
Trading Fee Refund
Get £200 back in trading fees
Affiliate links: If you purchase a This is Money product you may earn a commission. These offers are chosen by our editorial team as we think they are worth highlighting. This does not affect our editorial independence.
Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.