As a hospitality business in the UK, you’re no stranger to the importance of tipping. It’s an integral part of the dining experience and goes a long way in supporting our hard-working staff. With the impending introduction of the new Tips Bill legislation in 2024, there’s been a whirlwind of questions about how it will affect businesses and what steps need to be taken. One thing is clear: waiting is not an option.
Why Act Now?
1. The Value of a Compliant Tronc Scheme
A tronc scheme is an arrangement for pooling and distributing tips and service charges amongst employees. An effective and compliant tronc scheme can potentially address many of the requirements set out in the new legislation. This includes the standards for:
Fairness: Ensuring all eligible employees receive a fair share.
Transparency: Clearly communicating to staff (and customers) how the tips are shared.
Record-keeping: Maintaining accurate records of distributions, which can be invaluable for potential audits or employee disputes.
By implementing a tronc scheme that aligns with these principles, you can ensure you comply with the new legislation and foster trust amongst your staff and patrons.
2. The Cost of Waiting
Delaying the setup of a tronc scheme until the new legislation is in place might seem harmless, but it can prove costly in the long run.
Every day you delay, you could miss out on National Insurance savings. A compliant tronc scheme results in National Insurance Contribution (NIC) savings for employers, and employees. Over time, these savings can significantly boost your bottom line.
See how the savings can quickly mount up;
- Pooled tips of £20,000 a month would save £2,760 per month in employers’ NI if processed through a tronc.
- If you delay until April 2024, this would be tax savings of nearly £14K over the next five months. Who can afford to lose that?
- Factor in the busy Christmas period and this could be even worse – tips over the five months of £150,000 would save over £20K!
The lost savings can be eye-watering for operators with multi-sites or high levels of tips. If you want to see what a tronc scheme can save you and your employees, check out our online Tronc Calculator.
3. Help your staff recruitment and retention
Alongside escalating costs, the other main challenge in the hospitality sector is the recruitment and retention of staff. Showing you have a fair and compliant tipping policy can only help with your staff’s perception of you as a good employer.
- The tronc boosts their take-home pay by negating NI on tips distributed through the tronc scheme (saving 12% in employees’ NI tax)
- You can easily demonstrate that your tip distribution policy is fair and transparent as the tronc rules are set and agreed upon by employees.
- Your tronc records will allow you to show what the tipping values have been in the past, which can be useful when trying to attract new staff.
4. Avoid the rush as the legislation looms
The Allocation of Tips Bill has been passed and will become law. All indications are that it will be April 2024, only five months away. As with other legislation changes, there will surely be a mad scramble of operators waiting until the last minute to implement the necessary changes.
There is no benefit to waiting; those who delay will likely find advice and capacity with independent Tronc services inundated. With services such as Troncmasters, which offer a fully managed service, there is an implementation phase where we spend time with the operator to advise and consult on the best tronc distribution structure. We then have to set up the scheme, communicate with employees and implement the processes. This all takes time, especially if it is a complex scheme, so leaving the decision until the last minute may lead to disappointment as to when the scheme can be made live.
What if you already have a tronc scheme?
For businesses that already have a tronc scheme in place, the introduction of the Tips Bill legislation might still bring about necessary changes. Two critical considerations are;
Multi-site pooling: The upcoming legislation may no longer allow tips to be pooled across multiple sites. This could drastically change your operation of the tronc, particularly for businesses with several venues.
Inclusion of Agency Workers: Another significant change is the potential inclusion of agency workers in the distribution of tips. If your business relies on agency staff, you may need to revise your tronc scheme to accommodate this. This will also impact the amount of the tips pool your contracted staff receive!
What should you be doing?
Being proactive in revisiting your tipping policy and tronc scheme isn’t just about compliance; it’s about doing right by your team and safeguarding your business’s financial well-being.
With the imminent roll-out of the Tips Bill legislation, now is the time to act. Review your current practices, consult with experts if needed, and ensure your business thrives in this ever-evolving hospitality landscape.
Our Troncmasters are also happy to have a discussion with you and answer any of your questions; just call 03331 122610