Government to ban 'tip top-ups' to minimum wage
Pubs and restaurants are to be banned from using tips to bring staff salaries up to the minimum wage level.
However, industry representatives have warned the move could backfire if it means staff have to pay higher National Insurance contributions.
Ten years on from the introduction of the national minimum wage, the government plans to change to the law to stop employers using gratuities and service charges processed through the payroll to top up staff wages.
The government said it would consult with the hospitality industry before implementing the change, expected to come into force next year.
Business secretary John Hutton said: "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, and 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."
Bob Cotton, chief executive of the British Hospitality Association told the BBC that the change could leave some staff worse off. While tips are taxable, staff do not currently pay National Insurance on tips used to top up wages.
Cotton said the industry would have to look at the detailed guidance to the changes, which will not be issued until after the consultation, to assess the full implications for staff.
Hutton said the government would also "encourage" outlets to tell customers how tips are distributed. A union-led campaign has recently highlighted the practice of employers holding back a precentage of tips and service charges to cover administration costs.
"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," said the minister.
