News Article

A Useful Tip...

07/05/2009 - Using tips to make up staff pay to minimum wage levels will be outlawed from 1 October 2009

Using tips to make up staff pay to minimum wage levels will be outlawed from 1 October 2009, the government announced yesterday (6 May 2009).

This, it is claimed, will give thousands of workers fair wages, ensure a fair and level playing field for employers and boost consumer confidence in the use of tips. The government also stated that it will be working towards greater transparency and clarity for consumers through a new industry code of best practice. Employment Relations Minister Pat McFadden said:

"When people leave a tip for staff, in a restaurant or anywhere else, they have a right to know that it will not be used to make up the minimum wage. It is also important for employers to have a level playing field on wages. This is a basic issue of fairness. We do not believe employers should be able to use tips meant as a bonus for staff to boost pay levels to the legal minimum."

The announcement is the government’s response to a consultation on the use of tips, gratuities, service charges and cover charges in payment of the national minimum wage. The government’s full consultation response on service charges, tips, gratuities and cover charges can be found at http://www.berr.gov.uk/files/file51166.pdf

Under rules in place since the introduction of the National Minimum Wage, where tips and gratuities are given directly to workers by customers and are retained by the workers without any other party being involved, they cannot count towards NMW payment. However, where service charges, tips, gratuities and cover charges are paid by the employer to the worker via the payroll then the tip can count towards national minimum wage pay.

The National Minimum Wage for adult workers is £5.73, the rate for 18-21 year olds is £4.77 and the rate for 16 and 17 year olds is £3.53. For more information, visit: http://www.direct.gov.uk/en/Employment/Employees/TheNationalMinimumWage/index.htm

The government is also currently considering the Low Pay Commission’s recommendations on minimum wage rates to take effect in October and will announce its decision shortly.