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Hutton serves up a fair deal on tips


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Released 31 July 2008

The Government today announced plans to amend regulations so that tips can no longer count towards payment of the National Minimum Wage, as it celebrates the 10th anniversary of its landmark NMW legislation.

The changes will end the practice of employers using gratuities and service charges processed through the payroll to 'top up' staff wages to meet the 5.52 per hour National Minimum Wage, which rises to 5.73 on 1 October.

Business Secretary, John Hutton, also revealed proposals for making tipping practices fairer and emphasised the importance of improving transparency.

"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, 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.

"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."

A consultation on implementing the Government's recommendations will be launched in the autumn.

Guidance for both workers and employers will be issued following the consultation to ensure a smooth transition when the regulations are changed, which is anticipated to be 2009.


1. Employment Relations Minister Pat McFadden will today (Wed 30th July) visit Pizza Hut at 4.30pm, 29-31 Regent Street, Haymarket, London,SW1Y 4NQ Piccadilly in order for broadcasters to film embargoed footage and interviews for this announcement. Please contact Alexandra Thompson 020 7215 5964 if you wish to attend.

2. Currently, where tips and gratuities are given directly to workers by customers and are retained by the workers without any other party being involved, they cannot count towards NMW payment. Where there is evidence that cover charges, service charges, tips and/or gratuities are paid by the employer to the worker via the payroll then the tip can count towards national minimum wage pay.

3. The UK minimum wage legislation received Royal Assent on 31 July, 1998 and came into effect in 1999. It is one of the highest in the OCED in terms of purchasing power. NMW for adult workers will increase from 5.52 to 5.73 from October 2008, with the rate for 18-21 year olds increasing from 4.40 to 4.77 and the rate for 16 and 17 year olds going up from 3.40 to 3.53.

4. From October 2008, the minimum wage (adult rate) will provide, with Working Tax Credits and other benefits, a guaranteed income of at least 292 per week for families with one child and one full time worker, which is equivalent to over 7.38 per hour.

5. In the last year alone the Government helped to restore 3.9 million in arrears to over 19,000 workers and has also increased the enforcement budget for the NMW by 2.9 million.

6. The Department for Business Enterprise and Regulatory Reform helps UK business succeed in an increasingly competitive world. It promotes business growth and a strong enterprise economy, leads the better regulation agenda and champions free and fair markets. It is the shareholder in a number of Government-owned assets and it works to secure, clean and competitively priced energy supplies

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Crown Copyright. Material taken from the BERR- Department for Business, Enterprise and Regulatory Reform replacing DTI - Department for Trade and Industry. Reproduced under the terms and conditions of the Click-Use Licence.

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Article Published/Sorted/Amended on Scopulus 2008-07-31 13:54:55 in Business Articles

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