Tronc is a special pay arrangement used in the hospitality industry to collect and distribute tips, gratuities and/or service charges to employees. In this article, we’ll dive into the origins, understand what is tronc, its purpose, the mechanics of its calculation and weigh up its pros and cons.
What does Tronc mean?
The word 'tronc' is thought to originally come from the French expression ‘tronc des pauvres,’ which means ‘poor box.’ In the early days of the hospitality industry, troncs were boxes that were placed in restaurants and other establishments to collect donations for the poor.
The term morphed into ‘tronc des employés,’ which means 'employees trunk.' A tronc system was initially used in Europe to distribute tips and service charges among staff in the hospitality industry.
The idea behind Tronc is to ensure fair and transparent distribution of gratuities among employees, while also addressing the taxation complexities associated with such earnings by managing Tronc through payroll software.
Why is Tronc used in hotels and restaurants?
Tronc serves as a method of pooling tips, service charges and other gratuities collected from customers and redistributing them amongst the staff members. This includes all staff who contribute to the customer’s experience – some of them front of house, others behind the scenes.
The primary goal of tronc is to reward each staff member fairly for their role in providing excellent service. Benefits of Tronc include promoting teamwork and increasing motivation.
Today, Troncs are more sophisticated than a simple box for pooling tips. They’re typically electronic systems that track all tips and gratuities received by the business. The tips are then distributed to employees through payroll software according to a predetermined formula.
Benefits of Tronc schemes
There are several benefits to using a tronc system in the hospitality industry. These benefits include:
- Fairness: Tronc systems ensure that tips are distributed fairly among all eligible employees. This can help to boost morale and motivation among staff members
- Compliance: Tronc systems can help businesses to comply with the law. For example, the Employment (Allocation of Tips) Act 2023 was brought into force to ensure that tips, gratuities and service charges paid by customers are allocated to workers
How does Tronc work and how is it calculated?
Calculating Tronc payments is a complex process that involves several steps to ensure that tips are fairly distributed. A simplified overview of how Tronc works and is calculated is:
- Customers give tips to their server or other staff member – either in cash or by way of a gratuity by card payment. Service charges also form part of Tronc
- The tips are deposited into the tronc
- The troncmaster, who’s a neutral third party, oversees the collection of tips from the tronc and the distribution of tips to the employees
- The distribution of tips is based on a predetermined formula, which will take into account factors such as the employee's position and hours worked
- In its simplest form, the calculation is based upon the total number of hours worked by all staff in the period and the total value of tips collected in the same period. This gives an hourly tips value per employee. Tronc is then calculated for each staff member based on the number of hours they worked in the period multiplied by the hourly tips value
- Tronc payments are made to employees as part of their earned income and is subject to PAYE. HMRC-recognised payroll systems will make the necessary deductions before making a tronc payment to the individual employee in their normal payrun
What are the pros and cons of Tronc?
Like any system, Tronc has its advantages and disadvantages.
Pros of distributing tips via a Tronc scheme:
1. Transparency: Tronc encourages transparency in tip distribution, as employees can see how gratuities are divided
2. Teamwork: Tronc fosters a sense of teamwork, as employees understand that their efforts contribute to collective success
3. Fairness: When implemented correctly, Tronc ensures that each staff member is rewarded equitably for their role in customer satisfaction
Cons of distributing tips via a Tronc scheme:
1. Complexity: The calculation and distribution of Tronc can be complex and errors might lead to dissatisfaction among employees
2. Administrative burden: Managing Tronc requires administrative effort which can be time-consuming and costly for the establishment
3. Discrepancies: There’s potential for disagreements among employees about the fairness of the distribution formula
4. Income variability: Tronc’s reliance on customer gratuities makes employees' income variable, which can create financial uncertainty
Tronc plays a pivotal role in the hospitality industry by shaping how gratuities and service charges are shared among staff members. Rooted in the quest for fairness and transparency, Tronc has both benefits and challenges.
Its impact on employee motivation, teamwork, and customer satisfaction is undeniable. However, its intricate nature demands careful management to make sure that the system functions as intended and continues to uphold its core value of sharing tips fairly amongst team members.
Some additional things to keep in mind about troncs:
- Tronc schemes must be operated in accordance with the law. In the UK, the law on Tronc schemes is complex and constantly changing. It's important to seek professional advice from payroll specialists to ensure that your Tronc scheme is compliant
- Tronc schemes can be a source of conflict between employees. It’s important to have clear and transparent rules about how tips are distributed
Some payroll providers integrate with Tronc solutions whereas some all-in-one HR and Payroll solutions have Tronc functionality built in. Not all payroll solutions are suitable for the hospitality industry, so it’s important to make sure that any solution chosen for use in the hospitality industry has the capability to calculate and pay Tronc as part of the payroll process.
