Millions of workers paying ‘unnecessary’ National Insurance

According to research conducted by IRIS Software Group (IRIS) in partnership with Censuswide, nearly 1.2 million employees working in the hospitality sector are paying more National Insurance then they should. The research found that nearly half of hospitality businesses added the pooled tips it had collected on card payments into existing PAYE or payroll without using a system called tronc. A tronc is a separate organised pay arrangement sometimes used to distribute tips, gratuities and service charges.The system doesn’t allow the employer control of the allocations of tips and under HM Revenue and Customs (HMRC) rules are excluded from National Insurance contributions,According to HMRC, if employees get payments through a tronc system the person who runs the tronc must run a payroll and report the information to HMRC.This is important as HMRC will need to set up a new PAYE scheme for the tronc system.However, as 46 percent of hospitality businesses are not doing this, it means that hospitality employees are ‘unnecessarily’ paying National Insurance on their tips.READ MORE: Half a million pensioners to miss out on state pension rise due to where they live Millions of Britons are paying excessive National Insurance contributions on their tips (Image: GETTY)IRIS states that over two-thirds of pubs are not operating a correct tronc system.As cash is no longer the main form of tipping in the UK, more and more workers will be facing this problem.According to IRIS, 64 percent of restaurants, cafes, pubs and bars accept tips made on debit cards and just over half were operating a service charge in their venue.These have to be shared with staff through payroll to be compliant with tax law.DON’T MISSRishi Sunak ‘will do what’s right’ pensioners told as they await verdict on 10.1% rise [TRIPLE LOCK]Halifax customer warns of ‘classic’ cold call scam where fraudsters can steal your details [FRAUD]Pensioner ‘amazed’ to get £18,000 cheque after Martin Lewis’ state pension warning [PENSIONS TIP] How much National Insurance is the UK paying? (Image: EXPRESS)The new laws will include: an obligation for all employers to pass on tips to staff without any deductions, a Statutory Code of Practice that stipulates how tips should be distributed to ensure fairness and transparency, and new rights for workers to request an employer’s tipping record.This would allow workers to make a credible claim in an employment tribunal.At the time of the announcement, the labour markets minister Paul Scully said: ‘Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service.’Our plans will make this illegal and ensure tips will go to those who worked for it. This will provide a boost to workers in pubs, cafes, and restaurants across the country, while reassuring customers their money is going to those who deserve it.’