Guaranteed Tronc Guide: What Hospitality Operators Need to Know
In simple terms, guaranteed tronc means an employee is promised a minimum amount from the tip pool for a defined period, regardless of how much the pool generates.
Imagine two venues competing for the same candidate. They offer similar salaries, but one guarantees a minimum level of tronc income. It’s easy to see why that’s attractive! For operators, it can look like one of the lowest-cost ways to enhance a recruitment package. For candidates, it offers certainty over earnings and can make one role look significantly more appealing than another.
But it raises important questions.
- Can it still be considered a genuine tipping scheme?
- Is it consistent with the spirit of the Employment (Allocation of Tips) Act?
- What does it mean for the rest of the team, whose share of the tip pool may ultimately fund that guarantee?
A Guaranteed Tip Has to Come From Somewhere
Tips are a finite pot.
If an employee is promised £1,000 a month from tronc, but their share of the available tips is only £600, there is a £400 shortfall. There are two obvious ways to deal with it:
- The business pays the additional £400 from its own funds.
- The £400 is taken from amounts that would otherwise be allocated to other members of the tronc.
These scenarios raise very different issues.
HMRC’s guidance specifically addresses arrangements where an employer guarantees an employee a minimum amount from a tronc. Where the employer has a contractual obligation to make up any shortfall themselves, HMRC treats that amount as contractual earnings, not a tip.
See HMRC’s E24 guidance, Examples 8 and 13, and NIM02935.
But What If the Guarantee Is Taken From the Tronc?
This creates a different problem, and raises the issue of fairness. Take this example:
- In September, a venue collects £8,000 in tips. Elsie, a senior bartender, and James, the head chef, are guaranteed £1,000 each.
- The remaining £6,000 is shared between 15 people, giving them £400 each.
- At this point, Elsie and James are receiving 2.5 times more than the rest of the team.
- Now fast forward to a quieter month. In October, only £4,000 is collected. Elsie and James still receive £1,000 each.
- That leaves £2,000 to be shared, or around £133 each for the rest of the team. The difference has now grown significantly.
- Elsie and James are receiving around 7.5 times more than everyone else.
Imagine explaining that to the rest of the team! Most employees don’t read tronc policies for fun, but they know when something doesn’t feel fair.
There is absolutely nothing wrong with different roles receiving different shares of tips. As senior bartender, Elsie may receive a larger proportion than a barback, James more than a kitchen porter. A role-based or points-based tronc may result in a senior employee consistently receiving a larger share of tips, though their allocation still rises and falls with the size of the tip pool.
Those differences can be entirely fair when they’re based on clear, objective factors. The concern is protecting some employees from the volatility of the tip pool while leaving everyone else exposed to it.
That matters not only from a people-management perspective, but also in the context of the Employment (Allocation of Tips) Act 2023. which places greater emphasis on the fair and transparent allocation of tips. HMRC’s guidance (NIM02945) also treats a guarantee met from the pool itself as evidence of employer control, which can trigger National Insurance liability on those amounts.
What initially looks like a low-cost way to enhance someone’s package may create onerous additional compliance considerations.
A Better Recruitment Approach
We know that recruiting and retaining highly skilled hospitality staff can feel like the Hunger Games. Competition for great people is fierce, and there’s nothing wrong with pulling out all the stops to make an attractive offer.
If a business wants to provide greater certainty over earnings, there is a straightforward way to do it. That commitment can be reflected in salary or another appropriate contractual payment. There may be a higher upfront cost to providing certainty through pay rather than through the tip pool, but looked at more broadly, it can help retain skilled employees across your team and create a clearer compliance position.
The tronc can then remain what it is supposed to be: a mechanism for fairly distributing tips generated by customers.
The Bottom Line
There are better ways to compete for great people: culture, leadership, development, progression and competitive pay – supported by a tronc scheme employees understand and trust.
If you’re reviewing your own approach, we’re happy to provide a confidential assessment of your tipping and tronc arrangements and help ensure your scheme is built on solid foundations.
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