NATIONAL MINIMUM WAGE
Fair deal on tips
New rules came into force on 1 October 2009 to ensure that workers get a fair deal on tips and wages. The changes make it illegal for businesses to use tips to bring staff pay up to minimum wage levels.
They came into effect on the same day as new increases to national minimum wage rates which will benefit up to one million people:
Low-paid workers aged 22 and over get an increase from £5.73 to £5.80 an hour.
The rate for 18- to 21-year-olds has risen from £4.77 to £4.83.
For 16 and 17-year-olds, the rate has gone up to £3.57 an hour from £3.53.
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Background
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 could not count towards NMW payment. Where service charges, tips, gratuities and cover charges, are paid by the employer to the worker via the payroll then the tip could count towards national minimum wage pay.
The change to regulation that comes into force on 1 October means that no tips, service charges, gratuities or cover charges can be used to pay the NMW.
A final word
“When I leave a tip I don’t expect it to be used to make up the minimum wage. I want it to go to the person who has served me as a thank you for their service. This is a basic issue of fairness. Tips are meant as a bonus – not a tool to boost pay to the basic minimum.
“That’s why the government has closed this legal loophole. Thanks to the help and support of Unite, the British Hospitality Association, the CBI, Consumer Focus and other stakeholders we are also able to launch a new code of best practice today. This will promote good tipping practices amongst businesses and ensure that consumers are clear about what happens to their money.” - Lord Mandelson, Business Secretary.
Want to know more?
--> Form E24 Tips, Gratuities, Service Charges and Troncs
For pay periods starting on or after 1 October 2009 tips, gratuities, service charges and cover charges will not count towards national minimum wage pay in any circumstances. Please see page 7, Chapter 9 of the E24: www.hmrc.gov.uk/news/september.htm.
Other sources of information:
Department for Business Innovation & Skills: You can download details of the announcement of the latest hike in the minimum wage by accessing the BIS web site. Web: www.berr.gov.uk/whatwedo/employment/pay/index.html.
Directgov: The government site provides an easy-to-use guide to UK employment law, including minimum wage regulations. Web: www.directgov.gov.uk.
Low Pay Commission: The LPC was established as a result of the National Minimum Wage Act 1998 to advise the government about the national minimum wage. Web: www.lowpay.gov.uk.