National Minimum Wage and tips

An Employment Appeal Tribunal has ruled in HMRC’s favour in the case of Annabel’s Restaurant and Nightclub.  The case concerned the payment of tips through a ‘tronc’, which is an arrangement which sometimes operates in the restaurant industry. The ‘tronc’ which operates as a separate independent payroll, run by a ‘troncmaster’ is used by some restaurants as a means of distributing tips or service charges paid by customers. HMRC have argued successfully that where the tips are paid in this way they do not count towards national minimum wage (NMW) entitlement.

However, it should be noted that where tips are paid along with wages through the main employer payroll then the tips and service charges distributed do count towards the NMW.

A spokesperson for the Department for Business said:

‘It is essential that all UK workers receive the pay they are entitled to and that everyone earns at least the National Minimum Wage. Equally, it's important that tipping is fair and we are already examining what options are available to help ensure transparency.’

Annabel's Restaurant may seek permission to appeal the Judgment.

The main rate of the NMW is currently £5.52 per hour increasing to £5.73 from 1 October 2008.

The development rate for employees between 18 and 21 years old is currently £4.60 increasing to £4.77 from 1 October 2008.

16 and 17 year olds must be paid a development rate which is currently £3.40 per hour increasing to £3.53 from 1 October 2008.

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