Walters (trading as Rosewood) v Barik

An Employment Tribunal may award the gross amount of unpaid wages where tax and National Insurance deductions arise, leaving the employer to establish the correct deductions and account for them to HMRC. The Tribunal need not resolve complex PAYE questions, particularly where arrears relate to several years and are paid after employment has ended.

Compensation and unpaid salary are distinct. A grossing-up exercise relevant to compensation does not determine the proper form of an award for unpaid taxable wages.

The Employment Tribunal found that the claimant had worked for the respondent for seven years without receiving wages. It ordered payment of £180,200 gross for unlawful deductions from wages, stating that tax and National Insurance might be deducted.

The respondent appealed, contending that the Tribunal should have specified the net sum payable after tax and National Insurance. The appeal also raised the application of the Income Tax (Pay As You Earn) Regulations 2003 to substantial arrears paid after employment had ceased.

1. Appeal dismissed. The Employment Tribunal’s order for a gross sum was acceptable and sufficiently clear.
2. The tax position concerning seven years’ salary paid in arrears after termination was unusual and complicated. It was not necessary, or appropriate, for the Employment Tribunal or the EAT to determine precisely how the gross award should be apportioned for tax purposes.
3. The proper course was for the respondent to contact HMRC, establish the amount payable directly to the claimant and the amount to be accounted for to HMRC, and then make the necessary payments. The respondent remained under a continuing obligation to deduct and account for tax in accordance with the applicable PAYE rules.
4. The reference to the Employment Rights Act 1996 and the Income Tax (Pay As You Earn) Regulations 2003, including Regulation 37 and Regulation 37(2), did not require the Tribunal to calculate the precise net amount. The EAT expressly declined to resolve the detailed tax questions.
5. Interest was a separate issue and did not undermine the conclusion on the wage award. Compensation was also a different category from unpaid salary; the usual tax-free compensation grossing-up exercise was not applicable.
6. A costs order of £1,562.28 was made. The appeal was unnecessary and operated as a further delay in payment.

• Employment Tribunal, Watford: ordered payment of £180,200 gross for unlawful deductions from wages, in an order sent on 27 May 2015.
• Employment Appeal Tribunal: dismissed the appeal and ordered the respondent to pay costs of £1,562.28.