What does the proposed tips legislation mean for troncs?

Proposed tip legislation

After a false start in 2019 (the Queens speech referred to the distribution of tips and then no further update was given) the Department for Business, Energy and Industrial Strategy (BEIS) issued on 24 September 2021, plans to ensure that employees receive 100% of tips left by customers in hospitality establishments.

The intention of the proposed legislation is crystal clear, to stop unscrupulous employers syphoning 10%, 20% in some case 50% of tips left by customers and not paying those over to the employees. As Troncmasters we fully support the intentions and consider that a properly managed tronc scheme is designed to be a fair and cost effective way of distributing tips.

What is 100%?

As with most proposed legislation the headlines are simple but the detail follows later. The guidance does not provide any reassurances on what is meant by 100% of tips and service charges. However, having reviewed the document in detail we consider that the principle motivation is to stop the syphoning of funds by employers.

Looking at the wording used in the guidance to ascertain what is meant by 100% and consider how the guidance will sit with our services as troncmaster, it states:

  • ‘All tips will go to staff under new plans to overhaul tipping practices.’
  • ‘Research shows that many businesses that add a discretionary service charge onto customer’s bills are keeping part or all of these service charges’
  • ‘The government will make it illegal for employers to withhold tips from workers’
  • ‘This will ensure customers know that tips are going in full to workers and not businesses.’

We think that the wording is deliberate and specific. It relates to the keeping and withholding of tips from employees. Consequently we do not consider that the new legislation will affect efficient and effective tronc schemes that are run by third party troncmaster for the benefit of the employees.

Using a Troncmaster to distribute tips

At Troncmasters we have 2 schemes; committee led and Troncmaster led. In the case of the committee schemes a committee runs the tronc scheme, the employer holds all tips and service charges received, then notifies the troncmaster and committee of the funds for distribution.

This arrangement is mirrored when we as Troncmasters run the scheme after agreeing with the employees of the basis of distribution of the tips.

In both cases the amounts available are held on behalf of the scheme by the employer. The money belongs to the scheme not the employer. There are minor costs associated with Troncmasters  running a tronc scheme which are deductible. However, we considered that these minor costs are acceptable because the scheme is run for the benefit of the employees, and the agreements we have with the employees account for a small deduction for our fees in connection with the running and administering of the scheme.

100% of the funds have therefore been made available to the employees.

Of course this is our interpretation of the guidance issued by BEIS. We await for the detailed Green Paper to be issued which will set out the basis for the legislation.

For further details on the guidance and tronc schemes in general please contact our experts