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The Employment Appeal Tribunal (EAT) last month gave an important judgement about tips, service charges and the national minimum wage.It ruled that gratuities paid through a 'tronc' system are not wages paid by the employer. A tronc works by tips and service charges being collected and then held on trust by a member of staff, who then distributes it to colleagues. Many employers count these sums towards the minimum wage but the EAT has ruled that this is unlawful.
The ruling in favour of HM Revenue & Customs against Annabels restaurant and night club means that employers must pay their staff at least the national minimum wage regardless of any tips or gratuities, service or cover charges, so long as the tips are not paid directly through the employer's payroll.