There’s a difference between cutting costs and cutting corners.
This is true of everything – from choosing the right wholesalers to establishing your troncs regime.
Cutting costs is a must-needed sanity check of your outgoings. It happens after sustained periods of growth are met with a stall, a step back in the economy or a desire to see an improved profit.
Cutting corners, meanwhile, is an error that happens while cost-cutting. It takes place without you even knowing it. It feels the same as cost-cutting, and the books certainly look more balanced… but eventually, you lose customers, staff or both.
Why? Because cutting corners is a reduction in the wrong product, service or infrastructure, and it damages your offering.
Okay then, let’s talk troncs
A tronc is a great way to oversee tips. It means nobody pays National Insurance because the business has not allocated the money.
You have a choice when you establish such a system: administer it in-house or outsource it.
For some hospitality businesses, the decision to do this work in-house can help them cut costs. For others, though, it’s a mistake. You’ve accidentally cut a corner in your infrastructure.
Whether you should have an internal tronc or outsource it depends on your business.
So how do you decide? We suggest that if you’re thinking about going in-house, your tronc system passes the three tests that really count.
Test one: you’re ready for the new law that’s coming
In the past, distributing tips & service charges fairly and correctly was, frankly, something of a “nice-to-have”. Tip distribution was about business ethics and reputation, and mistakes were forgivable, but service charge was at the discretion of the business. Because of this, a business could, if it wanted, decide to keep a percentage of the monies taken for its own use.
Those days are over.
The Employment (Allocation of Tips) Act 2023 says that all tips need to go to the staff. As a business, you don’t get to keep any – whether that’s deliberately or by mistake.
And with the new law comes the need for very robust record-keeping and transparency. Anything else means potential complaints, scrutiny and costly legal trouble.
So, do you know this new law inside out, and do you feel prepared to meet its full requirements?
Test two: your staff are happy with taking on a tronc
You might be happy with legislative demands, but do you have a staff member that feels up to the challenge of being Troncmaster, bearing in mind this is on top of their day-to-day responsibilities?
Remember, you can’t directly help them with running a tronc if you’re within the leadership of the business, or anyone else with hire-and-fire power.
So you need to make sure that your staff are ready for the responsibility. They have to be happy that their name is on the paperwork that goes to HMRC and that they will be the administrators and decision-makers. The buck stops with them. When colleagues have a problem with tips, the troncmaster is on the frontline.
This sums up some of the burden on your chosen Troncmaster; in reality, though, you need at least one extra person on standby for when the tronc administrator leaves, becomes ill or goes on holiday.
Test three: your troncmaster is not everyone’s mate
So you’re aware of the legislation, and you have one person willing to step up as Troncmaster (and another to step in when they’re not around).
That brings us to the third test: is your potential in-house troncmaster too close to their colleagues to be objective?
Your troncmaster can’t have hire-and-fire powers, but – perhaps paradoxically – they can’t be too pally with the rest of the staff. Whoever undertakes the role must be able to maintain a reasonable personal and emotional distance between themselves and the rest of the team.
Why? Because everything should be distributed through an unbiased method, and they can’t have any conflicts of interest.
If they do, be aware this is a storm brewing at the heart of your workforce. It will unleash complaints and potential legal action – and leadership will have to deal with all that.
You can always outsource
Many times, it’s better to leave your staff to do what they do best rather than push them out of their comfort zone to manage the money they will be owed by law. And it’s not just them who are adversely affected – you endanger your own business’ reputation and finances if something goes wrong.
External Troncmasters are built to take the burden away. They devise and oversee the rules of the tronc professionally. Once staff are paid, they responsibly pass any required information to HMRC, or advise your finance team on how to do so correctly.
Any good external Troncmaster will stay ahead of legislation. At Troncmasters, our team regularly updates the hospitality industry on every twist and turn in the new Tip Law’s journey while prepping for any changes ourselves.
In fact, you don’t need to read anything about new tips laws while we’ve got your back. Not that we’d ever recommend that.
Quality external Troncmasters will also build accurate record-keeping into everything. A great service keeps everyone informed at the right level – and will ensure data is held securely in case it’s needed.