COMPLIANCE
Employment Tribunal ruling signals potential major change for holiday pay and tronc
Peter Davies, Client Services Partner, WMT Troncmaster Services, delves into a recent case which looks at tronc payments and holiday pay calculations
T he First Tier Tribunal (FTT) has awards paid by businesses are “earnings” for the purposes of holiday pay and, potentially, other worker entitlements laid out within the Employment Rights Act 1996, in Mr M Palanki v The Big Table Group: (https:// ow.ly/KcfB50UXBu1). The case has major implications for all hospitality businesses who don’t currently pay tronc to team members when they’re away on approved annual leave. The judgment is a FTT judgment concerning Big Table Group, the well-known operator of brands including: l Bella Italia recently published its judgment in a recent case concerning whether tronc
The case is a FTT judgment, meaning it doesn’t create a binding legal precedent, but will be treated as ‘persuasive’ in any future case where the facts are materially similar. The case didn’t involve any points that were specific to Big Table, and they’re in line with the way many other businesses operate. Subsequently, all operators must consider if they’re affected by the judgment and, if so, the steps they wish to take. “The worker in question claimed he was entitled to receive holiday pay based on an amount to include tronc, and the tribunal has backed that claim” The worker at Big Table Group had an employment contract which set out their rate of basic wage. It also gave the employee a right to participate in the tronc arrangement in place at their site, although it didn’t set out any specific or minimum amount the employee would receive and stated the tronc to be non-contractual. Such a clause is common as it doesn’t fall
foul of HM Revenue and Customs rules relating to National Insurance (NI), which would only be an issue should an explicit sum or overall amount including tronc be incorporated. The tribunal was satisfied that the tronc arrangement in place was real and valid, and not employer-controlled or a sham. It had no criticism of the troncmaster; nor was it suggested that the arrangements wouldn’t satisfy the conditions within legislation for exemption from NI. As is common practice, the physical tronc funds were held by Big Table Group in their bank account and then distributed to workers through the business payroll, in accordance with the troncmaster’s instructions and existing legislation (Regulation 100 of the Income Tax (Pay As You Earn) Regulations 2003). This can be located here: https:// ow.ly/y2qR50UXGbL. What was the verdict? In its findings, the tribunal concluded that, “when read together, the references to tronc in the claimant’s contract and terms and conditions provide him, not with a contractual entitlement to receive any particular guaranteed payment by way of tips, but with a contractual entitlement to receive what the tronc policy will give him on any given week… for so long as there is a policy entitling him to payments under the tronc, he is contractually entitled
l Banana Tree l Las Iguanas.
Details surrounding the claim The claim was brought by an employee working within a Las Iguanas site who received tronc while at work, but (and in accordance with the rules of the tronc system at that site) not during periods of annual leave when they received only holiday pay based on their basic (house) pay. The worker in question claimed he was entitled to receive holiday pay based on an amount to include tronc, and the tribunal has backed that claim. At the time of writing, it’s understood that the case will be subject to appeal.
| Professional in Payroll, Pensions and Reward | April 2025 | Issue 109 18
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