With employer National Insurance (NI) contributions set to rise in April 2025, businesses are facing increasing financial pressure. This is particularly challenging for industries like hospitality, where labour costs already represent a significant portion of expenses.
A tronc scheme can reduce National Insurance (NI) costs for businesses by exempting tips, service charges, and gratuities from NI contributions. This can help businesses save money and keep more of the tip money for employees.
Benefits of a Tronc Scheme for Employers:
Reduced Employer NI Contributions: Since tips distributed through a compliant tronc are not subject to employer NI contributions, businesses can significantly lower their NI liabilities.
Improved Cash Flow: Reducing NI costs frees up resources that can be reinvested into the business, such as staff training, marketing, or operational improvements.
Employee Retention: A well-managed tronc scheme ensures employees receive fair and transparent distributions, boosting morale and reducing turnover.
Tax Compliance: Partnering with experts like Troncmaster Solutions ensures the tronc complies with HMRC regulations, avoiding costly fines or audits.
NI Savings With A Tronc Scheme:
From April Employer National Insurance Contributions will increase from 13.8% to 15% on a worker’s earnings above £175.
So how can a tronc scheme help lower NI contributions for employers? Only basic pay is considered when determining whether an employee meets the National Minimum Wage (NMW) or National Living Wage (NLW). Tips, gratuities, and service charges—whether paid directly by customers or through a tronc scheme—cannot be factored into this calculation. Implementing a tronc scheme allows employers to make substantial savings, which can also benefit employees.
*information correct as at 16/1/25. Employer savings will increase from 1/4/2025.
Payments of tips do not attract National Insurance contributions if the:
tips do not originate from a mandatory service charge.
troncmaster is allocating money that originally was not paid to the employer and the employer does not pay the money directly or indirectly to their employees
employer does not determine, directly or indirectly, the allocation* of those tips
* deciding who should receive what amount by way of tips.
Why Act Now?
The rise in NI contributions makes it more important than ever for businesses to explore cost-saving measures. An independent tronc scheme is not only a solution to reduce NI costs but also a way to demonstrate commitment to fairness and transparency in the workplace.
Contact our team today for a free quote to set up and manage a tronc scheme for your business.
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