tips-and-tronc

---
name: tips-and-tronc
description: Turns how your venue actually handles tips, card gratuities and service charge today into the written tipping policy the law has required since 1 October 2024, a three year record that stands up to a worker's written request, a dated allocation method your team can read, a payment calendar built round the end of the month following deadline, and a clear statement of whether your tronc is independent enough for the National Insurance treatment you think you have. Use when there is no written tipping policy, when a member of staff asks what happened to the card tips, or before anyone sets up or changes a tronc.
---

# A tipping policy, an allocation method and a three year record, written down the way the law has required since October 2024

You give this your current practice, the card gratuity and service charge figures from your till and your merchant statements, your rota, your worker list including agency workers, and whatever tronc arrangement exists. You get back the written policy the statute requires, an allocation method stated in words your team can check, a payment calendar that meets the deadline, a records template that answers a worker's written request, and a plain statement of where your arrangement sits on independence for National Insurance. It will not choose your allocation method for you. The statute requires a fair allocation and the statutory Code lists the factors an employer may weigh, but the weighing is an employment decision that belongs to you and your HR adviser.

## What it does

1. **Decide first which money is even in scope, because the answer changes the whole file.** Section 27C of the Employment Rights Act 1996 defines qualifying tips, gratuities and service charges as employer received tips, plus worker received tips that are "subject to employer control" or connected with such a tip. An employer received tip is one the employer or an associated person receives, and a worker received tip is one the worker receives directly "and which is not subsequently received by the employer or an associated person". Section 27C(5) treats a worker received tip as subject to employer control where "the employer or an associated person exercises control or significant influence over the allocation of the tip". In practice a card gratuity and a service charge on a bill are almost always in scope; a coin left on a table and pocketed is usually not, unless somebody is directing where it goes.

2. **Write the duty down in its own words before you design anything round it.** Section 27D(1) reads: "An employer must ensure that the total amount of the qualifying tips, gratuities and service charges paid at, or otherwise attributable to, a place of business of the employer is allocated fairly between workers of the employer at that place of business." Section 27D(2) makes the allocated amount payable to the worker by the employer, and section 27D(3) requires that regard must be had to the relevant provisions of the statutory Code when deciding what is fair. Fair is not defined as equal, and it is not defined as whatever the rota says.

3. **Put the deadline in the calendar before the policy, because it is the part that breaks first.** Section 27G requires the employer to allocate the tip and make the payment "no later than the end of the month following the month in which the tip, gratuity or service charge was paid by the customer". Paragraph 33 of the statutory Code of Practice repeats it: "employers must ensure that all tips are distributed to staff, at the latest, by the end of the month following the month in which the tips are paid by customers". December card gratuities are therefore due by the end of January, which is the month with the least cash in a hospitality business. Build the calendar with the payroll dates already marked, twelve months out.

4. **Write the policy the statute actually asks for, not a paragraph in the staff handbook.** Section 27I(1) requires a written policy wherever qualifying tips are paid at a place of business "on more than an occasional and exceptional basis". Section 27I(2) says the policy must include "whether the employer requires or encourages customers to pay tips, gratuities and service charges at the place of business" and "how the employer ensures that all qualifying tips, gratuities and service charges paid at, or otherwise attributable to, the place of business are dealt with in accordance with this Part, including how the employer allocates qualifying tips, gratuities and service charges between workers". Section 27I(3) requires it to be made available to all workers at that place of business, and section 27I(6) requires the same for every amended version.

5. **Choose the allocation factors deliberately, record why, and have your HR adviser read it.** Paragraph 23 of the Code lists factors an employer may use, including type of role, basic pay, hours worked during the period when tips are received, individual or team performance, seniority or level of responsibility, length of time served, and customer intention. The skill does not pick for you. What it does insist on is that whatever you pick is written in a sentence a member of staff can apply to their own shift and arrive at their own number. A method nobody can check is a method that will be challenged.

6. **Deal with agency workers explicitly, because the statute does and most policies do not.** Section 27H treats an eligible agency worker doing work for the principal at a place of business as if they were a worker of the principal and as if the principal were their employer. Where an amount is payable to an agency worker, section 27H(3) permits it to be paid instead to the agent within the period specified in section 27G, and section 27H(4) then makes it payable by the agent to the worker "before the end of the month after the month in which the agent is paid the amount". Neither the employer nor the agent may make unauthorised deductions. Paragraph 17 of the Code addresses exactly the mixed team, "a mixture of permanent staff, directly recruited staff, agency workers and zero hours contract workers in the same location".

7. **Build the record to the standard of the request it has to answer.** Section 27J(1) requires the employer to create a record of how every qualifying tip has been dealt with and to maintain it "for a period of three years beginning with the date on which the qualifying tip, gratuity or service charge was paid". Section 27J(2) requires the record to include the amount of qualifying tips paid at the place of business and the amounts the employer allocated to workers there, and the amounts the employer arranged to be allocated by an independent tronc operator. Section 27J(3) gives a worker the right to make a written request for those records, and paragraph 43 of the Code repeats the three year period. A spreadsheet that shows only what was paid out cannot answer this. The record has to start with what came in.

8. **State honestly where you stand on the tronc and National Insurance, and do not let the answer be the one you would prefer.** HMRC's guidance E24 defines a tronc as "a special pay arrangement used to distribute tips, gratuities and service charges" and a troncmaster as "the person, other than the employer, responsible for arrangements to share tips among employees". It states that PAYE "must be operated on all tips paid by an employer to an employee", and that the National Insurance exemption depends on two things together: that the troncmaster is allocating money that did not originally come to the employer and the employer does not pay it to employees directly or indirectly, and that "the employer does not determine, directly or indirectly, the allocation of those tips". E24 gives the trap in its own example: an employer who requires a points system to be implemented is "indirectly allocating the tips" even though somebody else does the distributing. Section 27F of the Employment Rights Act 1996 now sits alongside this, allowing an employer to make arrangements for an independent tronc operator to allocate the tips where it is fair to do so, and HMRC's guidance states that the 2024 legislation "does not change how these payments should be assessed for tax and National Insurance contributions". Two separate tests, one arrangement, and it is entirely possible to satisfy one and fail the other.

9. **Hand the arithmetic and the record building to Codex once every decision is made.** Put the till exports, merchant statements, rota, worker list and your written decisions in one working folder and run, from that folder:

   ```
   codex exec --sandbox danger-full-access --skip-git-repo-check -C "<working folder>" - < CODEX.md
   ```

   Claude hands over the tips received by month and by source, the worker list with the factor values you have chosen, your allocation method stated as arithmetic, and the deadline dates. Codex returns the tips ledger, the allocation working, the payment calendar, the three year record template and a gaps file. Codex never chooses a factor, never writes the policy and never decides whether an arrangement is independent.

10. **Date it, publish it to the team, and set the two triggers that bring it back.** Record the version date, the date it was made available to workers and how, and keep every superseded version because the three year record has to explain allocations made under the old one. The two triggers are a change in how tips are taken, which includes a new till or a new card terminal that changes where the gratuity lands, and any change in who allocates, which includes a new troncmaster or a new manager who starts deciding the split.

## Then it checks

1. Every category of money the venue receives is recorded as in scope or out of scope under section 27C, with the reason stated, and no category is left unclassified.
2. The written policy contains both matters required by section 27I(2), stated in the policy's own words, and the file records the date and method by which it was made available to all workers at the place of business.
3. Every month in the record has an allocation date and a payment date, and no payment date falls later than the end of the month following the month the tip was paid by the customer.
4. The allocation method is stated so that a single worker's allocation for a single month can be reproduced from the method and the recorded factor values, and one worked example proves it.
5. The record for each month shows the total qualifying tips received at the place of business as well as the amounts allocated, so that a section 27J(3) request can be answered from it without further work.
6. The file states in one sentence whether the employer determines, directly or indirectly, the allocation of tips paid through any tronc, and names the evidence for that answer.

Any check fails: name it, redo that step once. Failed twice: say what is wrong and stop.

## Rules
- Public information only.
- Never invent a fact, a number or a quote.
- Anything sent in someone's name says whose name it is.
- Never state a typical tip percentage, a usual service charge level, an average tip per head or what share of a venue's takings tips normally represent. No published figure exists for a single independent UK venue, the numbers that circulate come from payment providers and from surveys of large groups, and an owner who budgets against a borrowed figure will either promise the team money the venue does not take or quietly suppress a share that is genuinely theirs.
- Never choose the allocation factors. The statute requires fairness and the Code lists factors that may be weighed; choosing among them is an employment decision for the owner with their HR adviser or solicitor, and a skill that quietly designs a tronc has made that decision for them.
- Never state that an arrangement qualifies for the National Insurance treatment of an independent tronc. The skill records the facts, quotes the two conditions in E24 and puts the conclusion to the owner's payroll adviser, because the answer turns on who really decides the split rather than on what the paperwork says.
- Never let the record start at the payout. A record that shows only what was distributed cannot answer a worker's request for the amount of qualifying tips paid at the place of business, which is what section 27J(2)(a) requires.
- Never deduct anything from tips in the working without a written basis supplied by the owner and checked by their payroll adviser. Unauthorised deductions are specifically prohibited for agency workers by section 27H, and an undocumented deduction is the single easiest thing for a tribunal to find against.
- This output is a working document prepared for the owner to check against their own till and payroll records, and for their accountant, payroll adviser and HR adviser or solicitor to check before any policy is published or any allocation is changed. It applies published rules to facts you supply. It is not legal, tax or employment advice, and it is not a ruling that your tipping arrangement complies.

## Built from
- Employment Rights Act 1996, section 27C, https://www.legislation.gov.uk/ukpga/1996/18/section/27C, read 23 September 2026: the definition of qualifying tips, gratuities and service charges and the employer control test, in step 1.
- Employment Rights Act 1996, section 27D, https://www.legislation.gov.uk/ukpga/1996/18/section/27D, read 23 September 2026: the fair allocation duty and the requirement to have regard to the Code, in step 2.
- Employment Rights Act 1996, section 27E, https://www.legislation.gov.uk/ukpga/1996/18/section/27E, read 23 September 2026: non-public places of business and the option to allocate across public and non-public sites, in step 1.
- Employment Rights Act 1996, section 27F, https://www.legislation.gov.uk/ukpga/1996/18/section/27F, read 23 September 2026: independent troncs and the fairness condition on making those arrangements, in step 8.
- Employment Rights Act 1996, section 27G, https://www.legislation.gov.uk/ukpga/1996/18/section/27G, inserted by the Employment (Allocation of Tips) Act 2023 and in force 1 October 2024, read 23 September 2026: the end of the month following payment deadline, in step 3.
- Employment Rights Act 1996, section 27H, https://www.legislation.gov.uk/ukpga/1996/18/section/27H, read 23 September 2026: eligible agency workers, payment through the agent and the prohibition on unauthorised deductions, in step 6.
- Employment Rights Act 1996, section 27I, https://www.legislation.gov.uk/ukpga/1996/18/section/27I, read 23 September 2026: the written policy duty, its required contents and the duty to make it available, in step 4.
- Employment Rights Act 1996, section 27J, https://www.legislation.gov.uk/ukpga/1996/18/section/27J, read 23 September 2026: the three year record, what it must contain and the worker's written request, in step 7.
- Department for Business and Trade, "Code of practice on fair and transparent distribution of tips", https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version, in force 1 October 2024, read 23 September 2026: the payment deadline at paragraph 33, the written policy trigger at paragraph 34, the fairness factors at paragraph 23, mixed teams at paragraph 17, tronc instructions at paragraph 31 and the three year record at paragraph 43, in steps 3, 5, 6, 7 and 8.
- HM Revenue and Customs, "When National Insurance and PAYE is due on tips, gratuities and service charges (E24)", https://www.gov.uk/government/publications/e24-tips-gratuities-service-charges-and-troncs, published 28 March 2014, last updated 18 July 2025, read 23 September 2026: the publication page and its update history, in step 8.
- HM Revenue and Customs, "Guidance on tips, gratuities, service charges and troncs", https://www.gov.uk/government/publications/e24-tips-gratuities-service-charges-and-troncs/guidance-on-tips-gratuities-service-charges-and-troncs, last updated 18 July 2025, read 23 September 2026: the definitions of tronc and troncmaster, the PAYE duty, the two National Insurance conditions and the indirect allocation example, in step 8.

# tips-and-tronc

## You are given
For one UK hospitality business, by place of business: every category of money the venue receives that might be a tip, gratuity or service charge, each with the owner's classification as in scope or out of scope under section 27C of the Employment Rights Act 1996 and the reason for that classification. The monthly totals for each category for the period being recorded, each traceable to a named source such as a till export, a merchant statement line or a cash reconciliation sheet, with the date the customer paid. The worker list for each month, including directly employed workers, zero hours workers and eligible agency workers, each marked with their role, their status, their start and leave dates where these fall inside the month, and the agency name where applicable. For every allocation factor the owner has chosen, the value for each worker for each month, supplied by the owner. The owner's allocation method written as arithmetic, including the order of operations, how ties and rounding are handled and where any remainder goes. The owner's payroll dates for the twelve months ahead. Every deduction the owner intends to make, with its written basis. The tronc arrangement if one exists, including who the troncmaster is, who appointed them, who decides the allocation and what instructions they were given. Every judgement call, including which money is in scope, which factors are used, how they are weighted and whether any deduction is permitted, has already been made by the owner and is supplied to you.

## Produce
Write into a `./tips-and-tronc-output/` folder:

1. `scope-classification.csv` with these columns in this order: `category_ref`, `category_name_verbatim`, `how_received`, `in_scope`, `statutory_basis_verbatim`, `reason_verbatim`, `classified_by`, `date_classified`. `how_received` is exactly one of `card_gratuity`, `service_charge_on_bill`, `cash_to_employer`, `cash_direct_to_worker`, `app_or_qr_tip`, `voucher_or_other`. `in_scope` is exactly one of `in scope`, `out of scope`, `not classified`. Every row reading `not classified` is listed in `gaps.md`.
2. `tips-ledger.csv` with columns: `month`, `place_of_business`, `category_ref`, `amount_received_gbp`, `date_range_covered`, `source_document`, `source_line_verbatim`, `received_by`. `received_by` is exactly one of `employer`, `worker_direct`, `tronc`. One row per category per month per place of business. A `TOTAL` row per month carries the sum of every in scope category, which is the figure a request under section 27J(3) has to be answered from.
3. `allocation-working.csv` with columns: `month`, `worker_ref`, `worker_name_verbatim`, `worker_status`, `agency_name`, then one column per allocation factor named exactly as the owner named it, then `method_result_units`, `share_of_units_percent`, `allocated_amount_gbp`, `deduction_gbp`, `deduction_basis_verbatim`, `net_amount_gbp`, `calculation_source`. `worker_status` is exactly one of `employee`, `worker`, `zero_hours`, `eligible_agency_worker`. `calculation_source` is exactly one of `owner method applied`, `factor value missing`. Any row with a missing factor value has empty amount cells and a line in `gaps.md`, never an estimate. The monthly total of `allocated_amount_gbp` must equal the monthly in scope total in `tips-ledger.csv` to the penny, and where it does not, the difference is reported in `gaps.md` and no file is silently adjusted.
4. `worked-example.md` reproducing one single worker's allocation for one single month in full: the month, the worker reference, each factor value with its source, each step of the arithmetic in the order the owner's method sets out, the rounding applied and the final figure. It uses only the owner's method and adds no step of its own.
5. `payment-calendar.csv` with columns: `month_tips_paid_by_customer`, `statutory_deadline_date`, `planned_allocation_date`, `planned_payment_date`, `payroll_run_date`, `days_before_deadline`, `within_deadline`, `agency_onward_deadline_date`. `statutory_deadline_date` is the last day of the month following the month in `month_tips_paid_by_customer`. `within_deadline` is `yes` or `no`. `agency_onward_deadline_date` is the last day of the month after the month the agent is paid, and is left empty where no agency worker is in that month.
6. `three-year-record.csv` with columns: `month`, `place_of_business`, `total_qualifying_tips_gbp`, `allocated_by_employer_gbp`, `allocated_by_independent_tronc_gbp`, `worker_ref`, `worker_name_verbatim`, `amount_allocated_to_worker_gbp`, `date_paid`, `record_created_date`, `retain_until_date`. `retain_until_date` is three years from the date the tip was paid by the customer. One row per worker per month, plus one header row per month carrying the three totals.
7. `tronc-independence-facts.md` recording, on separate lines and nothing else: who the troncmaster is; who appointed them; who decides the allocation method; who decides the factor values; whether the employer or an associated person receives the money before the troncmaster does; what written instructions or framework the employer gave the troncmaster, quoted verbatim; and whether any of those instructions specifies a method, a weighting or a points system. It states no conclusion. The last line reads: this file records facts for the owner's payroll adviser to assess against HMRC guidance E24; it does not state whether the tronc is independent.
8. `gaps.md` a numbered list of: every category with no classification; every month with no source document; every worker with a missing factor value; every month where the allocated total does not equal the in scope total, with the difference in pounds; every planned payment date later than the statutory deadline; every deduction with no written basis; every agency worker with no onward deadline recorded; and any figure the owner supplied without a date.

## Rules
- Codex classifies from the owner's classification, applies the owner's method, adds up, compares against dates and records. It never chooses an allocation factor, never weights a factor, never decides what is fair, never writes the tipping policy, and never states whether a tronc is independent. All of that was supplied or is for the owner's advisers.
- Never estimate a factor value, an amount received or a worker's hours. A missing value produces an empty cell and a line in `gaps.md`.
- Never balance the allocation by adjusting a figure. If the allocated total and the received total differ, both are reported and the difference is named.
- Never apply a deduction that has no written basis in the input, and never net a deduction into an allocated figure. Deductions have their own column and their own basis column.
- Never write a typical tip percentage, an average gratuity, a service charge norm or any industry benchmark into any file. No such figure exists for a single independent UK venue and none is to be recorded.
- Never carry a factor value, a worker list or an allocation forward from a previous month. Each month is built from that month's supplied inputs.
- Never treat a payment date as compliant because it is close to the deadline. `within_deadline` is `yes` only where the planned payment date is on or before the last day of the month following.
- Use British English, GBP written as `GBP` or the pound sign, and DD Month YYYY dates. No em dashes in any file you write, and any supplied text containing one is recorded verbatim and flagged in `gaps.md`.
- Every quoted worker name, category name, statutory wording and instruction to a troncmaster is copied exactly, including its punctuation and capitalisation.
- Every file ends with this line: this is a working document prepared for the owner to check against their own till and payroll records, and for their accountant, payroll adviser and HR adviser or solicitor to check before any policy is published or any allocation is paid. It applies a method supplied by the owner and is not advice on tax, National Insurance or employment law.

## Return
The absolute path of every file written, the row count of each CSV, the number of categories classified in scope and out of scope and the number unclassified, the monthly in scope total and the monthly allocated total for every month with the difference where one exists, the number of workers allocated in each month broken down by status, the count of months where the planned payment date falls after the statutory deadline with those months named, the count of workers with a missing factor value, the count of deductions with no written basis, the earliest `retain_until_date` in the three year record, a statement that `tronc-independence-facts.md` states facts only, and the `gaps.md` item count.