Tips, gratuities, service charges and troncs: what it puts on your payslip

The published figures

What it puts on, or takes off, the payslip

Tronc

Your share of the pooled tips, allocated by the troncmaster rather than by your employer. It belongs in the payments block with income tax charged against it and nothing in the National Insurance column. If the tronc runs its own PAYE scheme, as E24 requires unless HMRC has agreed something else, this line may sit on a separate slip from your wages rather than underneath them.

Service charge distribution

Your share of a service charge added to the bill. A voluntary charge, one the customer was clearly free not to pay, is treated the same as a tip. A mandatory charge is not: HMRC's position is that National Insurance is always due on a mandatory service charge paid out to staff, however it is shared, so seeing one distributed through a tronc with no NI is a red flag rather than a bonus.

Gratuity

Card tips the employer collected and then handed out on a split the employer chose. Both conditions for the disregard fail, so this line should show income tax and Class 1 National Insurance, exactly like basic pay. If the line is named Gratuity but no NI moved, either there is a tronc you were not told about or the payroll is wrong.

Taxable gross pay and gross pay for NI

Two different totals, and the gap between them is where a tronc shows up. In a month with a qualifying tronc payment, taxable gross should exceed gross for NI by the tronc amount. If the two figures are identical and you were paid tips, the exemption is not being applied.

Employee National Insurance

The deduction that should not move when tronc pay arrives. Work out your NI from your contractual pay alone, then compare. If a heavy tips month lifted the NI figure as well as the tax figure, the tips were treated as ordinary earnings.

Deductions shown against a tronc line

PAYE income tax, and National Insurance only where the exemption does not apply. Nothing else. Section 11 of the Tipping Act rewrote section 13 of the Employment Rights Act 1996 for tips, so a deduction from allocated tips is lawful only where a statutory provision requires or authorises it. A contract term does not make it lawful, and neither does your written consent.

Card processing or admin charge

A line that should not exist. Section 27C(6) fixes the qualifying amount as the actual amount the customer paid, and says deductions from it are disregarded when working that amount out, whoever made them. The bank's fee is the employer's cost, not a reduction in the pot.

Pensionable pay

Often lower than taxable gross in a tips month. Qualifying earnings for automatic enrolment are defined by a closed list in section 13(3) of the Pensions Act 2008, covering salary, wages, commission, bonuses, overtime and the statutory payments. Tips are not on it. A scheme is free to define pensionable pay more widely, so the answer is in your scheme rules and not on the payslip.

Cash tips kept by you

Absent from the payslip entirely, and correctly so. Money a customer handed you that never reached your employer and that your employer has no say over is outside PAYE. It is still taxable, and reporting it is your job rather than payroll's.

What goes wrong

National Insurance deducted from a tronc payment that qualified for the disregard

The commonest failure, and the most expensive one to leave alone. The disregard is not an option the employer elects; it follows from the facts. Where an independent troncmaster decides the split, Class 1 National Insurance is not due, and taking it anyway costs you 8% of every tronc payment between the primary threshold and the upper earnings limit. Compare taxable gross against gross for NI on three payslips in a row.

The tronc is run by a manager who also sets the allocation

This destroys the exemption rather than bending it. HMRC's example is an owner who requires the troncmaster to operate a points system the owner devised: the troncmaster is carrying out the employer's wishes, so the employer has allocated the tips indirectly and NI falls due on everything the tronc pays out. The same guidance warns that appointing someone who influences how the business is run, a director for instance, may itself point to indirect allocation. If the employer, a partner or a company officer is the troncmaster, E24 puts every tronc payment back through the employer's payroll.

Tips used to top you up to the minimum wage

Unlawful since 1 October 2009 and still unlawful. Regulation 10 of the National Minimum Wage Regulations 2015 lists payments made by the employer representing customer service charges, tips, gratuities and cover charges among the amounts that do not form part of remuneration. Your basic pay has to clear the minimum wage before a single tip is counted. Check the hourly rate on the payslip against the rate for your age, using contractual pay only.

No written tipping policy, and nobody asked for one

Where tips are paid at your workplace on more than an occasional and exceptional basis, section 27I requires a written policy and requires the employer to make it available to every worker there, in plain language and in an accessible format on request. Not having one is its own breach with its own tribunal claim, separate from any argument about the money.

Back of house excluded with no reason recorded

Before October 2024 leaving the kitchen out of the tronc was a house rule. Now the duty is to allocate all qualifying tips fairly between the workers at the place of business, and the Code lists distribution between front of house and backroom workers as one of the factors an employer should weigh. Exclusion is not automatically unfair, but the factors used have to be stated in the policy, so an unexplained split is the thing to challenge.

A card fee or breakage taken out of the pot first

The amount that has to be allocated is what the customer actually paid, with any deductions disregarded. Deducting the card processing charge, a till shortage or an administration fee before sharing the money out reduces the pot below the statutory figure. Ask for the tipping record: it has to show the total qualifying tips received at the site, so the total and your share can be compared against the terminal reports.

A mandatory service charge run through the tronc with no NI

HMRC's National Insurance Manual is explicit that where the tronc funds are compulsory service charges, the payments out are not gratuities or payments in respect of gratuities, so they cannot be disregarded. This one usually shows up when a venue adds a non-negotiable charge to every bill and the payroll treats the distribution as tronc pay. The unpaid NI is the employer's liability, and it accrues quietly until HMRC reviews the records.

What to check on your next payslip

• The written tipping policy has to state the factors that decide who gets what, and section 27I requires it to be available to every worker at the site. Once you know the rule, you can test your share against it. Without it you are arguing about a feeling, and the absence of a policy is itself a breach with its own claim.
• A written request is the mechanism section 27J provides, and it reaches the site total as well as your own share. Section 27J gives you the right to ask, and the employer has four weeks to answer. You can cover one month or several consecutive months, going back up to three years, for any month you worked there, and you can ask once in any three month period. The answer must give the total qualifying tips taken at the site and the amount allocated to you.
• Taxable gross pay and gross pay for National Insurance are two separate totals on the same payslip, and a qualifying tronc payment sits in one and not the other. The two figures should differ by the amount of the tronc. Identical figures in a month you were paid tips mean the exemption was not applied and you overpaid National Insurance.
• Section 27G keys the deadline to the month the customer left the tip, not to the payroll run that eventually paid it. The tip must be allocated and paid by the end of the following month. A June tip paid in August is late, and lateness is one of the two failures that carry the twelve month claim rather than the shorter one.
• Cash tips your employer never handled sit outside PAYE entirely, and the reporting route is your personal tax account or a Self Assessment return. Tips paid straight to you with no employer involvement carry no PAYE and no National Insurance, but they are still taxable. HMRC collects the tax by adjusting your code, and an estimate that is left uncorrected follows you into next year.
• Pensionable pay is whatever your scheme rules define it as, which is not the same closed list as automatic enrolment qualifying earnings. Qualifying earnings under section 13(3) of the Pensions Act 2008 do not include tips. A scheme can be more generous, and some are, so the scheme rules decide whether the payslip figure is wrong.
• Both time limits run from the date of the failure, or from the last failure in a series, rather than from the day you found out about it. Twelve months for a complaint about how tips were allocated or when they were paid, and three months for one about the policy or the records, rising to six months where the failure happens on or after 1 October 2026. Early conciliation extends them.

The 12 occupations this reaches, and how

Each line is specific to that trade. Where a scheme depends on how you are engaged rather than on the work itself, the line says so.

Bar Staff

Bar tips arrive by two routes with two different answers. Coins dropped in the jar are worker-received tips that stay outside the Act unless your employer controls how they are shared, while card tips added at the terminal are employer-received from the moment they land. If you are supplied through an agency, the bar still has to weigh you in the allocation. Gov.uk's example of a bar that ignores its agency worker says a tribunal would probably find that unlawful. The money then reaches you through the agency, which must pass it on without unauthorised deductions.

Barista

Almost every tip you take comes off a prompt on the card reader, so it goes into the employer's merchant account and counts as an employer-received tip from the start. HMRC's guidance on electronic tips is that paying by app or terminal changes none of the underlying tests. In a coffee shop with no tronc that usually means PAYE and Class 1 National Insurance on your share, and the exemption only appears once somebody independent of the owner is deciding the split.

Chef

You are salaried while the tips move with covers, so a tronc share is the part of your pay that changes and the part nobody explains. Watch for a contractual guarantee. HMRC's example of a chef promised a fixed sum from tips each week treats that sum as allocated by the employer, so Class 1 National Insurance is due on it even where the rest of the tronc pays out free of NI. A right to take part in the tronc is different from a right to a stated amount, and only the second one costs you the exemption.

Commis Chef

On a points tronc you sit at the bottom of the scale, and length of time served with the employer is one of the factors the Code expressly allows, so a smaller share is not automatically unfair. What is not allowed is a probation rule nobody wrote down. Gov.uk's example of a bar cutting tips for the first two weeks is compliant precisely because the policy applies to everyone, so ask whether the starter rate you are on appears in the written policy at all.

Head Chef

You are senior enough to be handed the tronc and, in most kitchens, not an officer of the company, which is the line that matters. A head chef can be the independent tronc operator and the exemption survives, because the test is whether the employer allocates rather than whether the allocator is senior. It stops surviving the moment the owner hands you the points system to run: HMRC treats that as the employer allocating indirectly, and National Insurance then falls due on everything the tronc pays out, to you and to everyone below you.

Hotel Manager

A general manager is usually a director or officer of the operating company, and E24 has a worked example of exactly that. A director of a hotel company is chosen by the staff as troncmaster. Every tronc payment then has to run through the company payroll, and the company rather than the director carries the PAYE. Your other complication is site by site. Tips have to be shared at the place of business where they were taken, so a group cannot pool the busy city hotel's service charge with the quiet one down the coast, however the hotels are managed.

Hotel Receptionist

Plenty of what you are handed at the desk never enters a tronc and never touches the payroll, because a tip a guest gives you that your employer neither receives nor controls falls outside the Act. The catch is the connection rule. A tip you keep becomes a qualifying tip if it is connected with another worker-received tip that the employer does control, meaning one taken at the same site in the same week or the week after. So a desk that pools nothing can still be pulled into the scheme by what happens in the restaurant.

Housekeeper

Cash left on the pillow and a card tip added at check-out are taxed by two different routes, and you will see only one of them on a payslip. The cash is yours, carries no PAYE and no National Insurance, and you report it yourself through your personal tax account or a Self Assessment return, after which HMRC usually collects the tax by changing your code rather than sending a bill. The card tip went to the hotel, so it is a qualifying tip that has to be allocated and paid through payroll by the end of the following month.

Kitchen Porter

Your job is the one the Act changed most. Kitchen porters were routinely left out of troncs on the reasoning that customers tip the people they meet. Since 1 October 2024 the duty has been to allocate all qualifying tips fairly between the workers at the place of business, and the Code lists front of house against backroom as a factor to weigh rather than an answer to assume. You can still be given a smaller share or none, but the employer has to state the factors in the written policy, and an exclusion that appears nowhere in writing is the thing to put in a records request.

Restaurant Manager

Being in the tronc and running it are two different problems for you, and the second is the expensive one. If you both take a share and decide the split while acting for the owner, HMRC treats the tips as allocated by the employer, National Insurance becomes due on every payment the tronc makes, and the liability is the company's. There is a further trap in the Code: it says staff agreement to a distribution method has to be genuine and not coerced by managers, so a scheme you talked the team into is weaker evidence of fairness than one they chose.

Sous Chef

You run service without setting the tronc rules, which is the position the exemption was designed for: your tronc line should show income tax and no National Insurance. Two of the Code's fair allocation factors point in opposite directions for a sous-chef. Seniority pushes your share up, while hours worked during the period when tips are received pushes it down on the split shifts and prep days you cover but the dining room does not see. Both are permitted, so the policy has to say which one the kitchen is being scored on.

Waiter

You are the worker the tronc rules were written around, and usually the one whose table the tip was left on. Where the tronc runs on points, HMRC's own worked example gives a waiter one point and the head waiter three, so your share moves with the rule rather than with your section's takings. Because card tips reach the employer's account before they reach the tronc, the first condition for the National Insurance exemption cannot be met, and whether your tronc line carries NI comes down entirely to whether the employer keeps out of the allocation.

Questions

Sources