National Minimum Wage – Consultation on service charges, tips, gratuities and cover charges

Monday, December 8th, 2008

The Government has now published an open consultation document to gather comments and views from employers, workers and consumers, in order to obtain a picture of the relationship between the NMW and the handling of both mandatory and non-mandatory service charges, tips, gratuities and cover charges. The consultation has two objectives, first to determine the precise nature of any regulatory change that may be needed, second to see how information given by restaurants to consumers can be improved.

The key proposals in these two areas are:

  1. to amend the existing legislation to prohibit the use of all mandatory and non-mandatory service charges, tips and gratuities paid through the payroll by the employer in any circumstances to be used towards payment of the national minimum wage.
  2. to provide information, e.g. on menus, signs and websites, explaining
    • who in the establishment receives the tips
    • the proportion of the tips given that are used by the business to cover costs
    • how the tips are distributed among the workers.
  3. the introduction of a code of best practice in each of the leisure, hospitality and service sectors, covering
    • how to distribute tips fairly among workers
    • guidance on what would be considered to be a fair administrative cost for business
    • how to make information available to consumers.

The closing date for responses to the consultation is 16 February 2009. Comments may be made by letter, email or using the survey monkey website, at

Further information:
Service charges, tips, gratuities, and cover charges: a consultation

The UK Payroll News is sponsored by HRD & Payroll Solutions

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