October go-ahead for fair tips


October go-ahead for fair tips

Using tips to make up staff pay to minimum wage levels will be outlawed from October 2009, the government has announced.

The government will also 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.”

He added: "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. Our consultation showed wide support for these changes, including from business groups, and we are working with them to ensure that consumers get the information they need."



Using tips to make up minimum wage level pay will be outlawed from 1 October 2009. 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. 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.

Consultation process

The announcement follows a consultation exercise on the use of tips, gratuities, service charges and cover charges in payment of the national minimum wage. A majority of businesses responding to the consultation backed the plan to ensure tips are not used to make up the minimum wage.

The government is working with consumer and business groups over ways of boosting clarity and information, which could include a new scheme for participating businesses to promote clear tipping practices.

Some reactions

Steve Brooker, markets expert for Consumer Focus, said: "We are glad the government has listened to calls from Consumer Focus and other groups to close the outrageous loophole allowing employers to use tips to make up the minimum wage.”

He added: "This is a real victory for common sense, for both employees and consumers. From October customers can be confident their tips will always go to waiting staff, which will allow employees to fully reap these rewards. In the meantime we would urge consumers to pay their tips in cash to ensure staff receive the full amount."

A spokesperson for Pizza Hut said: "We are pleased that the government has finally closed the loophole that allows employers to top up staff wages with tips. We have always ensured our employees receive 100% of their tips on top of wages and have been calling for an industry commitment to fair tips for some time.

Want to know more?

The government's full consultation response on service charges, tips, gratuities and cover charges can be found at www.berr.gov.uk/files/file51166.pdf.