Tips and the National Minimum Wage – Consultation Paper Issued


Over 6,000 people working in the hospitality sector in the South West could be affected by the Government’s proposals to change the law on tipping.

The Government is asking for feedback on their proposed changes  which would  prevent employers using tips or service charges to bring their workers’ pay up to the level of the National Minimum Wage and to make it clear to customers who receives  the tips and service charges.

Karen Plumbley-Jones, employment specialist at Truro  law firm Foot Anstey Hancock Caffin explains “At the moment, if tips are collected by the employer and paid to staff via payroll, they can count towards the NMW.  In the future the Government  is proposing that tips will never be allowed to count towards the NMW, although they are asking for  views on whether this should include cover charges.

“It is  estimated that around 45,000 people will benefit from this change in the law at a cost of around £73 million per year.

“However, it remains to be seen whether the rise in labour costs will be paid for by employers taking a higher share of tips, by customers in the form of higher prices or by a reduction in head count.”

Restaurants will have to make it clear how they distribute tips and  what proportion of a tip is passed to staff and what is retained by the restaurant as an administration charge.  The Government has proposed a code of best practice, which will include advice on distributing tips fairly, guidance on fair administration costs for businesses and how to make information available to consumers.  Suggested methods of doing this include  requiring restaurants to print their tips policy on menus,  publishing it on websites and  putting  up signs.

The Government is looking for views from employers, workers and consumers on a number of specific questions relating to these two issues, as well as general comments on the proposals.   Responses are required by 16 February 2009 and it is likely that legislative proposals will be published next Spring.  The consultation document is available at