Is Tronc Included in Pensions?

When it comes to pay in the hospitality industry, few topics create as much confusion as tips and tronc schemes. One of the most common questions employers and employees ask is: “Are tips pensionable pay?” and “Is tronc included in pensions?”

Let’s break it down.

Are Tips Pensionable Pay?

Under UK workplace pension rules, contributions are calculated based on an employee’s qualifying earnings between a lower and upper limit. These usually include salary, wages, bonuses, overtime, and statutory pay (like maternity or sick pay).

Tips given directly to staff are not classed as pensionable pay, because they’re outside of the employer’s payroll and qualifying earnings.

HMRC state that:

You have to pay Income Tax on any tips you get, and may have to pay National Insurance.

Who reports the tax and whether you pay National Insurance depends on:

• how the customer paid the tip

• how tips are managed at your workplace

If a tronc is not set up and tips are paid via the employer, rather than allocated via a troncmaster then the tips are considered part of your wages and are subject to PAYE, NIC and are pensionable.

What About Tronc Payments?

A tronc is a system for distributing tips and service charges fairly among employees, usually overseen by a troncmaster. When tips are paid through a tronc, they are subject to PAYE (Income Tax) but not National Insurance Contributions (NICs) – and therefore not part of qualifying earnings.

HMRC report that:

Legislation states that any amount paid to an employee which is a payment ‘of a gratuity’ or is ‘in respect of a gratuity’, is exempt from National Insurance contributions if it meets either of the following 2 conditions:

• it is not paid, directly or indirectly, to the employee by the employer and does not comprise or represent monies previously paid to the employer, for example, by customers

• it is not allocated, directly or indirectly, to the employee by the employer

Why This Matters

For employees, this means your pension pot is normally built on your core wages, not the extra income you receive through tronc. For employers, being clear on this helps avoid misunderstandings and ensures compliance with workplace pension law.

Tronc & Pensions: Quick Reference Guide

• Cash tips: not pensionable.

• Tronc payments: usually not pensionable unless your pension scheme allows it.

• Wages/salary: always pensionable.

Confused? – Don’t worry, this is what we do!

Understanding how tronc and tips interact with pensions helps both employers and employees manage expectations and stay compliant.

Contact our experts at Troncmaster Solutions today for a free quote and see how a compliant tronc scheme can benefit your business.

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