Minimum wage

Commissioners for Revenue and Customs v Annabel’s (Berkeley Square) Ltd and others [2009] WLR (D) 149; TLR 13 May

Annabel’s, George and Harry’s Bar Restaurants operated a tronc system for tips whereby by troncmasters allocated the money to participating workers in accordance with a point-based system depending on length of service, and also accounted for any income tax due under the pay-asyou-earn system. The money paid to a troncmaster became held by him on trust for the employees. The legal and beneficial interest in the money left the employer when it was paid to the troncmaster who held it for the employees beneficially. The employer could not claim that it paid the relevant money to the employee because it was not its money that was so paid. The employer might regard that as hard because the money so paid did admittedly derive from money that had once been its own. The result, however, flowed from a legitimate and genuine arrangement under which the administration and distribution of service charge money was to be handled exclusively and independently by the troncmaster; and which was established with an eye focused on the saving of national insurance contributions for employer and employee. The latter was a significant benefit but the manner by which it was achieved cost the employer the right to claim that the relevant payments fell within reg 30(a) of the National Minimum Wage Regulations 1999. Many would see no injustice in this; they would wonder why employers should be entitled to use discretionary tips to satisfy their obligations to pay staff the national minimum wage.