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Tribunal sides with HRMC over Annabel’s tips row
Friday the 13th proved to be a lucky day for people working in the hospitality industry, but an unlucky day for employers, as the Employment Appeal Tribunal (EAT) said that tips should not count towards minimum wage.
EAT sided with HM Revenue & Customs (HMRC) in a case against Annabel’s restaurant and nightclub in Berkeley Square, London, and said that tips, gratuities, service or cover charges – including troncs – do not count toward minimum wage, so long as the tips are not paid directly through the employers’ payroll.
The judge ruled that where service charges are paid by the customer to the employer, but are then paid into a troncmaster’s bank account for later distribution, the money was not being paid directly by the employer.
A spokesperson for HMRC, Denise Gaston, said: “Our priority is to ensure that all workers are paid at least the National Minimum Wage. We are very pleased that the court has recognised our commitment to ensuring that tips are correctly and fairly distributed to the people who earn them. This is good news for bar and restaurant workers across the UK.”
However, PricewaterhouseCoopers (PwC), the financial services firm, warned that the decision could bring widespread ramifications for the industry.
Mark Groom, PwC director, said: “If there is no appeal, or the appeal is lost, the ruling will call time on the practice of making up a portion of bar and restaurant staff wages from tips or service charges. This could bring huge cost implications for many employers in terms of base pay increases, loss of national insurance contribution savings and administration.”
The company expressed concern that the ruling could be applied more widely, to arrangements where employers make such payments directly from their own bank accounts to employees, following the instructions of a troncmaster.
“Until guidance on the implications and application of this ruling is issued, any uncertainty in the restaurant and hotel industries caused by the current economic climate may be compounded by this short-term instability.”
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