We operate payroll for a small number of restaurants and they are gradually reaching their staging dates for auto enrolment. I have a query about tips/service charge and whether they are 'qualifying earnings'.
Scenario 1 - the restaurant operates a Tronc scheme, run by a troncmaster with his/her own separate PAYE reference number and payroll scheme. I am confident that these tronc payments are outside auto enrolment.
Scenario 2 - the restaurant operates a Tronc scheme, with a troncmaster determining the split of tips amongst staff. However the payments are made through the company's main PAYE scheme with tax (but not NI) applied. I don't think these tronc payments are part of the staff's earnings for auto enrolment but any comments welcome.
Scenario 3 - this is where I am unsure. There is no Tronc system as such. The service charges received are paid out to staff with their normal pay at the end of the month. The allocation is done by the directors and is at their discretion, and therefore we are deducting full tax and NI on these payments. I am unsure whether these amounts are 'qualifying earnings' and whether we should include them in pension contribution calculations.
Any advice gratefully received!
Replies (9)
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All liable to AE. The only difference in Scenario 1 is that the Troncmaster needs an AE scheme, not the restaurant.
Jeez - what a mess we've made with our grace and favour tips and insistence on hard working restaurant staff touching their forelocks to the gentry. Just give these people a proper wage.
Here is the infinitely preferable way of dealing with tips
(NIC - great none)
(AE - great - none!)
(No stupid Troncmaster scheme - great!)
(No employer involvement - great!)
Extract from HMRC guidance E24:
If customers give cash tips directly to employees or
leave them on the table and individual employees keep
them without any involvement from the employer,
then PAYE does not apply.
It is the responsibility of the individual employee to
advise HMRC of the amounts of money received. The
tax will usually be recovered by an adjustment to the
employee’s PAYE tax code.
Link to E24 guidance:
https://www.gov.uk/government/publications/e24-tips-gratuities-service-c...
This latest guidance that I can find is dated 2014/15, I hope that it this is still valid.
Here is the infinitely preferable way of dealing with tips
(NIC - great none)
(AE - great - none!)
(No stupid Troncmaster scheme - great!)
(No employer involvement - great!)
I'm sure the kitchen staff think it's fantastic.
Oh - hang on a minute ......
I have a client who has a Tronc Payroll Scheme and they are receiving emails from The Pensions Regulator to complete their decaration of compliance so they obviusly aren't outside auto enrolement. The staff are already enroled in the restaurant's AE scheme so I doubt any would want to opt into the tronc AE scheme.
More enlightened employees might realise that extra pension contributions will mean extra pension.