Updated guidance confirms that tips, including those distributed through troncs, are excluded from furlough pay

Updated guidance confirms that tips, including those distributed through troncs, are excluded from furlough pay

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In another blow to the hospitality sector, updated guidance on the Coronavirus Job Retention Scheme (‘CJRS’) has confirmed that employers cannot include shared tips distributed through a tronc system when calculating wages as part of their claim under the CJRS.  

What does the CJRS guidance say?

Previous CJRS guidance specified that any calculation of wages made by an employer wishing to make a claim for a grant under the CJRS should exclude discretionary commission and bonus payments (including tips) as well as any non-cash payments.  It therefore seemed unclear, as to whether tronc payments (as a ‘shared tip’) could be included within these calculations. 

Recently updated guidance confirms that any tips, including those distributed through troncs, cannot be claimed as wages under the CJRS, because these fall into the category of payments made at the discretion of the employer or a client.  This exclusion would also capture other amounts paid “at the discretion of the client”, such as voluntary or discretionary service charges.  This is not particularly surprising given that the Government had announced that tips were excluded from the scheme but it will be a blow to the many thousands of workers who rely on tronc payments to supplement their wages.  

It seems arguable that mandatory service charges (whether or not distributed through a tronc) would still fall to be included in the CJRS wage calculation where the employer is contractually obliged to distribute these to employees.  Likewise, any contractual obligation (e.g. a guarantee) given by an employer as to a minimum amount of tips an employee will receive would arguably be included in the wage calculation as a “non-discretionary” payment.

The Government’s approach to variable wages and tronc payments reinforces the position that the CJRS is a relief primarily targeted at employers (and not individual employees, though they are an obvious beneficiary), with the size of grant calculated according to the employer’s wage costs (plus associated employer National Insurance and minimum pension contributions).  It is worth noting that tronc arrangements often operate entirely independently from the employer, in part because structuring it this way means that no National Insurance contributions are due on the tronc distributions.  Perhaps this goes some way to explaining the Government’s position.

The Chief Executive of UKHospitality, Kate Nicholls, said that the decision was “disappointing” and urged the Government to reconsider its position. However, unless this is revisited or further guidance provided, employers will only be able to include in their CJRS claim those regular payments they are obliged to pay employees, including wages and any non-discretionary overtime, fees and commission payments.


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