Are “tips” part of my salary?

October 6, 2015

Are “tips” part of my salary?

A recent case involving a restaurant manager has shown how workers who receive tips but do not officially declare them may not be entitled to basic employment rights.

The manager lodged an unfair dismissal claim against the company, Coia’s Cafe, but the case was dismissed after Judge Robert Gail realised the claimant had been receiving more tips than he declared, in the agreement with the cafe’s owners. The cafe operated a system whereby all tips were collected and split between workers every four weeks; however, there was an unofficial agreement that several staff would declare less than they had received.

The judge stated that the case could not proceed because the contract was tainted with illegality. An employment partner at Irwin Mitchell stated that ‘courts and tribunals will, as a general rule, not uphold or enforce contracts that are founded on immoral or illegal acts. Their job is to uphold the law, not to help people who break it’. In failing to officially declare his tips the cafe was avoiding paying tax on his extra income.

Employers should not perceive this as a defence of illegality though, as it involves the employer effectively admitting in the public arena that it has been involved in illegal activity.

This post is in: Employment Law Blogs

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