An employment tribunal appeal judge has ruled that tips cannot make up part of an employee’s minimum wage.

The judge made the decision in a case between HM Revenue and Customs and Annabel’s restaurant.

HMRC had argued that money paid to restaurant and bar workers through a tronc – a system for pooling and distributing tips – cannot contribute to minimum wage payments.

Finding in HMRC’s favour, the judge’s ruling means that employers have to pay their staff at least the national minimum wage irrespective of any tips, gratuities, service or cover charges, provided those tips are not paid directly through the employers’ payrolls.

HMRC had lost an earlier employment tribunal appeal case against Annabel’s in October 2007.

Handing down the judgement, the judge said that where restaurant or bar service charges are paid by the customer to the employer, but are then paid into a troncmaster’s bank account for distribution, the money is not “paid by the employer” for the purposes of being included in any minimum wage calculation.

Denise Gaston of HMRC 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 HMRC’s 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.”

Annabel’s have 14 days to seek permission to contest the ruling, which was delivered on 13 June.