You might be running a busy restaurant or coffee shop. Customers leave generous tips and your team works hard to earn them. But without a proper system in place, tips do not always reach the staff who deserve them most.
This is one reason staff turnover in the hospitality industry remains high. With Around 30% of employees leaving their roles each year, cafes and restaurants can no longer afford to take a casual approach to tips and service charges.
Constant hiring and training are time-consuming and expensive. Replacing an employee can cost between six and nine months of their salary which often equals 50% to 75% of their annual earnings.
Put simply, tips must go to the staff. They must be shared fairly and paid out within a reasonable timeframe. A tronc scheme makes this possible while helping businesses stay compliant and reduce National Insurance costs.
In this guide, we’ll explain what a tronc scheme is, how to manage it and the most effective ways to distribute tips and service charges in hospitality businesses.
What is a tronc scheme?
A tronc scheme is a formal arrangement used to collect and distribute tips among employees. Instead of treating tips as business income and processing them through standard payroll, a tronc allows tips and service charges to be shared separately under agreed rules.
This approach brings clear benefits for both employers and staff.
How does a tronc scheme benefit employers?
When customers leave tips through card payments or service charges, the money usually reaches your business bank account first. If these amounts are then paid to staff through normal payroll without a formal scheme, HMRC treats them as regular earnings.
As a result, the income becomes fully taxable. If tips are processed through payroll, your business may also be required to pay Employer’s National Insurance on those amounts. However, voluntary tips paid directly to staff are not subject to Employer’s National Insurance.
A tronc provides a compliant way to distribute tips and service charges. It removes the requirement for your business to pay Employer’s National Insurance on these payments which can result in a saving of around 15%. Many businesses work with a hospitality accountant to ensure everything is structured correctly and remains compliant with HMRC rules while maximising these savings.
How does a tronc scheme benefits employees?
From an employee’s point of view, a tronc scheme improves both fairness and take-home pay. Tips paid through a tronc are exempt from Employee National Insurance. This can increase take-home pay by around 10%.
For example, £350 in monthly tips could add around £35 to an employee’s pay.
A well-designed tronc structure also ensures tips are shared more fairly across the team. This includes front-of-house (FOH) staff as well as chefs, kitchen porters, cleaners and others who contribute to the customer experience.
How can you manage a tronc scheme?
Once you decide to introduce a tronc, the next step is choosing how it will be managed. There are two main approaches depending on the size and structure of your business.
1) Appointing a tronc master
A tronc master is the individual responsible for overseeing the tronc arrangement. Their responsibilities typically include:
- Setting and documenting tip distribution rules
- Gaining agreement from employees
- Collecting tips and service charges
- Maintaining accurate records
- Answering staff queries and resolving disputes
This role is often filled by a trusted senior staff member or an external individual. It is important to choose someone impartial who can manage the process fairly. Many businesses also choose to outsource the role to a specialist service to reduce risk and avoid internal conflicts.
2) Use the Tronc software
If appointing a tronc master isn’t practical, tronc software can offer an efficient alternative. These platforms automate tip pooling, distribution and reporting while ensuring compliance with the Employment (Allocation of Tips) Act. They also help reduce business costs and administrative burden.
Some of the leading UK tronc software providers include Grateful, TipJar and IRIS Tronc Payroll.
6 key ways to manage tips and service charges
The best way to distribute tips depends on the needs and goals of your business. Here are some common approaches used by hospitality businesses:
1) FOH-Weighted Split
A FOH-Weighted Split is a method where front-of-house staff receive a larger share of the total tip pool than back-of-house (BOH) staff.
Some cafes and restaurants implement this by giving the majority of card tips to FOH staff with BOH staff receiving a smaller portion. For example, a typical split might be 60–80% for FOH and 20–40% for BOH.
2) Balanced FOH/BOH Split
A Balanced FOH/BOH Split is a method where pooled customer tips are shared in a relatively even proportion between FOH and BOH staff.
This approach focuses on fairness with typical splits ranging from 50–65% for FOH and 35–50% for BOH.
3) Use a points system
A points system is a structured method for distributing tips in larger or more complex hospitality operations. Employees are assigned points based on factors such as their role, level of responsibility and hours worked.
These points are then used to calculate each staff member’s share of the tronc, providing a transparent and fair way to allocate tips across the team.
4) Percentage- based system
A percentage-based system is a method where fixed portions of the tip pool are allocated to different departments or roles within the business. For example, you can assign 70% of the pool to front-of-house staff which can be distributed as 40% for servers, 15% for bartenders, 10% for hosts and 5% for support staff.
This approach provides clarity and ensures each role receives a consistent share of tips.
5) Hours-based systems
An hours-based system is a method of distributing tips according to the number of hours an employee works. This can be based on contracted hours or actual hours worked.
Using contracted hours spreads tips evenly over time, accounting for holidays and other absences. The most common approach is actual hours worked as it is widely regarded as the fairest reflection of each employee’s contribution to service and their share of the tips.
6) Weighted-hours systems
A weighted-hours system is an enhanced version of the hours-based model that factors in additional multipliers to reflect the role or seniority of employees. This method recognises that contributions to service are not always equal and adjusts tip allocation accordingly.
Here are the two ways it works:
Basic Hours-Weighted Formula
Each employee’s Share = (Individual Hours Worked ÷ Total Staff Hours) × Total Tips
For example, if an employee works 40 hours in a week and the total hours for all staff is 400, they would receive 10% of the total tips.
Enhanced Hours-Weighted Formula with Role Multiplier
Each employee’s share = (Individual Hours × Role Multiplier ÷ Sum of All Weighted Hours) × Total Tips
This formula takes the hours each staff member works and adjusts them based on their role. Senior or more responsible staff get a higher multiplier which gives them a bigger share of the tips.
For Example:
- Management/Head Chef: 1.6
- Senior staff: 1.3
- Standard staff: 1.0
- Junior/trainee staff: 0.8
As Kyle Basnett, Onboarding Excellence Lead at Grateful says,
“A smart tronc shouldn’t just keep you compliant – it should improve how your teams perform”
Now more than ever, structuring your tronc scheme with expert guidance is essential.
At Rise Accounting, our team of specialist hospitality accountants helps businesses like yours set up and manage tronc schemes, payroll and tax compliance by acting as your outsourced finance function.
Contact our team here to learn how we can support you.
