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End to Tips Counting towards NMW

The government has announced that from October 2009 it will be illegal for employers to use tips to make up staff pay to minimum wage levels.

Since the National Minimum Wage (NMW) came into force it has been legal for the use of service charges, tips and gratuities to count towards payment of the NMW. Although many employers do already pass on tips directly to staff on top of the NMW, for those that currently use tips to make up wages, it is expected to cost approximately £95 million a year, through an increase in wages, tax and NI contributions. Incidentally this will net the treasury another £10.5 million a year.

The concern is that consumers will then leave a tip for the staff member which the employer will just keep to cover their increased costs. In some cases there is a risk that workers could take home less wages!  However, the government will also be working towards greater transparency and clarity for consumers through a new industry code of best practice.  They are taking ideas from their consultation such as a logo of “tipping good practice” establishments, and increasing publicity within individual establishments to inform customers of how their tips will be used. 

So make sure YOU know where your tip is going before you leave it!

This could be good news for the 60,000 + workers who are currently affected by the “tipping top up”, and will create a level playing field for all employers. As with all these things, time will tell!

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