How can I distribute tips in a way that increases take home pay and avoids potential national insurance settlements?

It is possible to set up as special pay arrangement (known as a “tronc”) that is used to distribute tips and service charges to employees. Payments made to employees through a tronc scheme allow employees to benefit from a 12% Employee’s National Insurance saving and employers to benefit from a 13.8% Employer’s National Insurance saving. 

For these savings to apply there are several conditions that must be met; the tronc scheme must be administered by an independent troncmaster (who must not be a director or owner of the business); tronc payments must not form part of the employees’ contractual pay; and the distributions must be decided only by the troncmaster. 

Setting up a tronc scheme can potentially lead to a cash tax saving for your business and provide additional incentivisation to your staff - contact us to find out more.

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