New Forest


Raising the bar with Troncmasters

On the 2 May 2023, the Employment (Allocation of Tips) Act 2023 was introduced to parliament with the intention of ensuring the fair distribution of tips within the service industry. The legislation will apply to “qualifying tips” which include tips, gratuities and service charges received by employees and employers alike. The key changes to look out for will be as follows:

  • Employers will no longer be able to make any deductions from the qualifying tips, such as admin fees for the handling of the tips, besides those taken for tax purposes.
  • A written policy defining the method for the allocation of tips must be available to all applicable staff to see.
  • The method of allocation must be fair for all workers. What is fair will be outlined within a separate code of practice to be released by the Secretary of State.
  • Employers must retain records of the allocation and distribution of tips for a minimum of three years from the date a tip is received. Workers can request a copy of some records which must be provided within four weeks of the request.
  • Payments of qualifying tips must be made to employees by the end of the month following the month that the qualifying tip was paid by the customer.
  • New rights to claims through the Employment Tribunal have been introduced for employees to ensure employers comply with the new legislation.

Tronc schemes have been highlighted within this act as a suitable method of distributing tips. These are separate pay arrangements managed by an individual ‘troncmaster’ who is independent from the employer. This troncmaster will be responsible for the allocation and reporting elements of qualifying tips through a separate PAYE scheme. The use of a tronc scheme can allow for tips to be received by employees without deductions for National Insurance, provided that the employer is not deciding how the money is divided.

The commencement date of this act has not yet been announced, however no transitionary period was included within the legislation so employers should make any required changes to their processes in advance of the act taking effect.

For further information on tronc schemes or any other payroll services please contact us on 023 8046 1222 or email James Alesbury.

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