Tips paid through mis-directed tronc system must be included in holiday pay

In the case of Mr M Palanki v The Big Table Group, the judge ruled that money received by employees as tips must be included in holiday pay.

This is a first instance decision which means it is not binding on other cases, even those with the same circumstances. However, it does give insight into how a tribunal would assess similar cases and employers should consider their position if they operate in a similar way. It also offers a reminder to check on the specific arrangements for the tronc to ensure that it does not inadvertently increase your risk of breaching the law.

The claimant was employed as front of house staff for the respondent and received hourly pay alongside tips via a tronc system.

There was no contractual entitlement to guaranteed tips, but there was a contractual entitlement to receive whatever amount the tronc policy determined in any given week.

There was a ‘troncmaster’ who had control over the allocation and distribution of tips, however, there was no separate bank account for the tronc. The troncmaster did not operate her own bank account, HMRC had not been notified of her position as troncmaster and no separate PAYE scheme had been set up in her name. Tips were paid through the same payroll system as normal wages.

Because of this, the Judge found that the payments were made “by the employer to the employee”. They also found the tips were “intrinsically linked to the performance of tasks which are required to be carried out under the contract of employment”.

Therefore, the tips counted towards the claimant’s “normal pay” and, as such, must be included when calculating holiday pay.

Tips paid via a troncmaster through a separate payroll as not considered to be paid “by the employer to the employee”.