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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Tips, gratuities and service charges: Tronc arrangements: Examples: Example 2 - Employer guarantees a minimum amount employees will get from the tronc

The facts

Ping, the proprietor of a restaurant, agrees with his employees a minimum amount eachwill receive in tips from the tronc. At the end of each week the troncmaster tells Pingwhether a top up payment is required to ensure that the employees receive the minimumamount of tips.


Ping has a legal obligation to make contractual payments to the extent he makes any topup payment. The existence of the legal obligation prevents top up payments from being atip, nor are they payments in respect of tips.

NICs are also due on the minimum payments derived from the tips as Ping has directly orindirectly allocated those payments by telling the troncmaster to pay a minimum amount.

If employees receive amounts from the tronc that exceed the minimum amount and Ping doesnot directly or indirectly allocate those payments, no NICs will be due on amounts paid inexcess of that minimum.