Landmark National Minimum Wage case
HMRC has won a ruling that tips given to staff working in the service industries should not count towards their National Minimum Wage. HMRC brought their appeal to theHigh Court after losing an Employment Tribunal case against the restaurant chain Annabel’s last October.
The confusion arises from restaurant and hospitality businesses that use “troncs” to deal with staff tips, gratuities and cover charges. Troncs are a system of pooling and redistributing tips to staff, and the pooling element typically means that tips are put into a bank account under the employer’s control – thus giving rise to grounds for arguing that the distributions from that account are “paid by the employer”. The High Court determined however that they should not be accounted for as such, provided the distributions occurred within the content of an agreed tronc scheme and provided they were not made through the employer’s ordinary payroll.