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Government serves up a fair deal on tips

Government serves up a fair deal on tips

The Government has announced plans to amend regulations so that tips can no longer count towards payment of the National Minimum Wage, as it celebrates the 10th anniversary of its landmark NMW legislation.

Currently, 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 there is evidence that cover charges, service charges, tips and/or gratuities are paid by the employer to the worker via the payroll then the tip can count towards national minimum wage pay.

The changes will end the practice of employers using gratuities and service charges processed through the payroll to ‘top up’ staff wages to meet the £5.52 per hour National Minimum Wage, which rises to £5.73 on 1 October.

Business Secretary, John Hutton, also revealed proposals for making tipping practices fairer and emphasised the importance of improving transparency. “The changes will mean that in the future, tips cannot count towards payment of the minimum wage.” He added: “We also want to encourage employers to make it clear how tips are distributed so that customers know where their money is going and whether or not the establishment operates a fair tipping policy.”

A consultation exercise will be launched in the autumn. Guidance for both workers and employers will be issued when the regulations are changed in 2009.  

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