National Minimum Wage – Proposals to prevent tips counting towards minimum wage rates

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Following recent high-profile newspaper campaigns, the Department for Business, Enterprise and Regulatory Reform has announced its intention to amend legislation so that tips will not count towards National Minimum Wage (NMW) compliance.

The current rules, set out in the National Minimum Wage Regulations 1999, do not permit “amounts paid by customers by way of a service charge, tip, gratuity or cover charge that is not paid through the payroll” to count towards employer compliance. The effect is that

• tips given to workers directly by customers and which workers retain without any involvement by the employer, do not count towards the NMW, but
• service charges, tips, gratuities and cover charges that are collected by the employer and paid to workers through the payroll do count towards the NMW.

These rules allow employers to pay a low hourly rate, in some case as low as £2 per hour, and use the tips to make up the hourly rate to the NMW, currently £5.52 per hour. Much of the criticism of this arrangement is that, according to evidence collected by the media, many employers retain some of the tips collected and do not pass them on in full to the workers.

Accordingly, the DBERR’s press release indicates that employers will be encouraged 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.” Whether and how such a requirement could be included in legislation remains to be seen.

A consultation document setting out the government’s recommendations is to be issued in the autumn.

Further information:
Hutton serves up a fair deal on tips

This entry was posted on Monday, August 11th, 2008 at 05:00 and is filed under Minimum Wage, National Minimum Wage, NMW. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.