Department for Business, Innovation and Skills
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Government puts fair tips on the menu

Government puts fair tips on the menu

DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release (2008/274) issued by COI News Distribution Service. 19 November 2008

The Government today launched a consultation on proposals to make tips fairer for hard-working service staff across the UK.

Under the plans, employers will be banned from using any tips or service charges towards payment of the national minimum wage.

Employment Relations Minister Pat McFadden said:

"When people leave a tip they expect it to go to staff on top of their pay, not to be used to make up the minimum wage. This is an issue of fairness and common sense.

"We intend to amend regulations so that tips can no longer count towards payment of the National Minimum Wage.

"We also want employers to make it clear how they distribute tips so that customers know where their money is going.

"It's crucial we get these changes right and we are keen to hear everyone's ideas as part of our consultation."

As well as inviting comments on proposals to change the rules so that tips are paid on top of the national minimum wage, the consultation will also look at ways of improving information for consumers.

When changes to the law take effect, a Code of Practice could provide guidance on issues such as how to distribute tips and inform customers about their policy on tips and gratuities.

Notes to Editors

1. The consultation closes on 16th February 2009. To find out more about this consultation visit: http://www.berr.gov.uk/consultations/page48902.html

2. 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 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.

3. The UK minimum wage legislation received Royal Assent on 31 July, 1998 and came into effect in 1999. It is one of the highest in the OCED in terms of purchasing power. NMW for adult workers will 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.

4. The minimum wage (adult rate) provides, with Working Tax Credits and other benefits, a guaranteed income of at least £292 per week for families with one child and one full time worker, which is equivalent to over £7.38 per hour.

5. In the last year alone the Government helped to restore £3.9 million in arrears to over 19,000 workers and has also increased the enforcement budget for the NMW by £2.9 million.

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