Use of tips to top-up wages banned from this week

Pubs are banned from using tips to top-up staff wages to the national minimum from tomorrow (October 1). And that change in the law comes into effect...

Pubs are banned from using tips to top-up staff wages to the national minimum from tomorrow (October 1).

And that change in the law comes into effect on the same day the adult rate for the National Minimum Wage (NMW) increases by 7p to £5.80 an hour.

Until now, it has been legal to calculate tips as part of the NMW - which has meant reduced national insurance payments for some businesses.

The British Hospitality Association (BHA) is backing a voluntary code of practice which calls on businesses to go further than the current law, and explain how tips are allocated by putting the information in writing and websites.

Business Secretary Lord Mandelson said: "When I leave a tip I don't expect it to be used to make up the minimum wage. I want it to go to the person who has served me as a thank you for their service. This is a basic issue of fairness. Tips are meant as a bonus - not a tool to boost pay to the basic minimum.

"That's why the Government has closed this legal loophole. Thanks to the help and support of Unite, the British Hospitality Association, the CBI, Consumer Focus and other stakeholders we are also able to launch a new code of best practice today.

"This will promote good tipping practices amongst businesses and ensure that consumers are clear about what happens to their money."

Trade union Unite has welcomed the change, which was announced following a 'fair tips' campaign co-ordinated by the union.

Derek Simpson, Unite joint general secretary said: "There is now an urgent need for the hospitality industry to be transparent in how they handle the tips and service charge money left for staff. The code will help consumers see where the money left for good service is going."

The new Minimum Wage rate

Effective from October 1 2009: