Government serves up fair deal on tips

Plans announced by the Government today mean that tips can no longer count towards payment of the National Minimum Wage. Business Secretary, John Hutton, also revealed proposals for making tipping practices fairer and emphasised the importance of improving transparency: "Hundreds of thousands of people in the UK have jobs in sectors where tipping is commonplace. When people leave a tip, in a restaurant or elsewhere, they expect it to go to service staff and as consumers, we've got a right to know if that actually happens. "This is an issue of fairness and common sense and it's one many people clearly care a lot about. Under the current law, all workers are already entitled to receive the minimum wage. The changes we're proposing will mean that in the future, tips cannot count towards payment of the minimum wage. "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." Bob Cotton from the British Hospitality Association seems dubious about the new rules, saying they have not been planned properly:" "I have yet to see proposals on this subject that have been thoroughly thought through. At present, they have a potentially highly unfavourable impact on pay for staff. The only person to gain will be the tax man." Because of the tax and National Insurance implications, staff on the minimum wage could, in fact, be many pounds a week worse off. The change would also have a significant impact on business costs. "If the government wants to make these changes, they should be considered over a longer period than is being proposed so that adjustments can be made to wages and selling prices," Mr Cotton added. 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. A consultation on implementing the Government's recommendations will be launched in the autumn. Guidance for both workers and employers will be issued following the consultation to ensure a smooth transition when the regulations are changed, which is anticipated to be 2009. The move follows well-documented campaigns by the Independent and Daily Mirror newspapers, who named and shamed food service operators who were found to be topping up wages with tips.