We need to talk about Troncs and service charges

On 18 December, I read the much anticipated Code of Practice on tipping, essentially “the new Tronc rules” - ?which come into force on 1 July 2024, hoping that it would address some of the key issues as written in the Act itself.?

I opened up Linked In and started to write a post but after rereading my words I realised that they, much like the guidance itself, didn’t really say anything. ?The only meaningful addition in the guidance was the introduction of the concept of “Fairness”, i.e that service charge should be distributed to employees is a fair and even manner – more of which later.

So I deleted the post and thought I would take the temperature of my clients and the wider market in the New Year.? It is fair to say that the temperature out in the sector is “high”….

However, before I go on it is important to clarify one point, nearly everyone I have spoken to is on board with paying all of the service charge to their staff, indeed most employers in the sector are already doing just that.? Yes, some would have liked the opportunity to keep 2 or 3% of the service charge to cover items such as bank charges and administrative fees – but the industry can clearly make their peace with the position to pay out 100% of service charge to employees.?

The increased mercury in the thermometer surrounds two main issues, firstly the fact that you have to pay out all of the service charges in the month following collection and secondly the fact that you have to, quoting the Act, allocate the service charge “between workers of the employer at the place of business…”.?

Taking both of these issues in turn.

1.?????? All service charge to be paid in the month following collection

If the hospitality sector had a steady workforce and was not a seasonal business, this wouldn’t really be an issue, but that’s clearly not the case.? Service charges collected by a restaurant is clearly substantially more in December than January and hence well-meaning employers have kept some tronc back in the good months to pay out in the difficult months and in so doing smoothly out the total “take home” for the staff.? Ultimately over the course of 12 months all of the service charge collected would be paid across to the Troncmaster for distribution to the staff.

Under the new rules, this sensible solution will no longer be an option and the worry is that there will be an exodus of staff in, say, February when the bumper Christmas Tronc has been received.? Or perhaps, employees will stay and find it difficult to budget through the year with such varying levels of weekly or monthly pay.

2.?????? The place of business rules

It is currently commonplace to pool the service charge collected across a number of sites and for the Troncmaster to spread the payments across the workforce irrespectively of the site worked.

The term “place of business” is included, in what is a short part of the Act, no less than 53 times. As currently drafted, there does not currently appear to be any other way to read “place of business” other than, that service charge must be distributed in the same site as it is collected.?

This brings a host of questions including:-

• What does multi-site company do with a range of, equally important, sites but where one site collects 5 times the service charge of the other?
• Is the employer meant to track staff that move from site to site to ensure that it is only the service charge collected during that shift that is distributed?
• Where do you train staff for a new site?
• How do you convince staff to go and work in a new site that is likely to be initially lower performing?
• Was this really the intention of the Act?

Unfortunately, I don’t have the answer to any of these questions.? I have talk to numerous CEOs and CFOs over the last three weeks or so (and indeed since last May when the wording of the Act was released) and we have gone through some wild and wacky ideas, none of which quite work.

When I thought about these questions, I was drawn back to words in the guidance and to whether there is a conflict between the Act as written and the concept of Fairness.? Is it fair that someone else earns significantly more purely on the basis of which site they work within?

The Act also mentions Customer Intention - this is more grey.? ?I don’t think that the majority of the customers would begrudge a server sharing their tip with the chef who cooked the food.? Is there such a difference between sharing with their tip with the person who trained the server or the chef that may now work at a site down the road? Or someone who worked at the site yesterday – perhaps prepping the food for today’s service?

The Department for Business & Trade have opened a consultancy period into the draft Code of Practice open until 24 February 2024 before the final version of the Code is published in Spring 2024.?

As there is no easy way (for example, a website or email address) to send views to the government, we are happy to collate the key points from the industry and submit on your behalf as advisors to the sector.

If you would like your views to be included, please email me at [email protected] by 17 February clearly using “New Tronc Rules” as the title.

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