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Mandelson Serves Up Fair Deal On Tips And Announces New Minimum Wage Rates


BIS Department for Business Innovation and Skills - Expert Author

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Issued 30 September 2009

New rules come into force tomorrow (1 October) to ensure that thousands of workers get a fair deal on tips and wages.

The changes make it illegal for businesses to use tips to bring staff pay up to minimum wage levels.

They come into effect on the same day as new increases to national minimum wage rates which will benefit up to one million people.

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.”

The action on tips is the latest development in the 10 year history of the National Minimum Wage. The new rates for this year, which also come into effect tomorrow, are:

· Low paid workers aged 22 and over get an increase from £5.73 to £5.80 an hour.

· The rate for 18 to 21-year-olds has risen from £4.77 to £4.83.

· For 16 and 17-year-olds, the rate has gone up to £3.57 an hour from £3.53.

Business Secretary Lord Mandelson said:

“The National Minimum Wage remains one of the most important rights for workers. It has made a real difference to the lives of the UK’s lowest-paid workers. It protects them from exploitation and also creates a level playing field for business, making a huge contribution to the UK’s economic success.”

Consultation during the development of the Government’s policy on tipping has shown wide support for the changes, including from business groups, unions and consumer groups. The code of practice will be closely monitored to ensure that it is a success, with a review in one year's time.

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 launched today will help consumers see where the money left for good service is going. Unite is looking to the sector to adhere to the best practice principles and ensure that customers have the information they need to make an informed choice before they leave a tip or service charge. Unite wants to see all employers sign up to the Code and ensure that their staff and customers can be confident that staff are treated fairly."


1. Under rules in place since the introduction of the National Minimum Wage, where tips and gratuities are given directly to workers by customers and are retained by the workers without any other party being involved, they could not count towards NMW payment. Where service charges, tips, gratuities and cover charges, are paid by the employer to the worker via the payroll then the tip could count towards national minimum wage pay. The change to regulation that comes into force on 1 October means that no tips, service charges, gratuities or cover charges can be used to pay the NMW.

2. As with all NMW issues, the law will be enforced by Her Majesty’s Revenue and Customs.

3. The latest NMW rates were recommended to the Government by the independent Low Pay Commission. The Low Pay Commission was established following the National Minimum Wage Act 1998 to advise the Government about the National Minimum Wage. Its commissioners include representatives from business groups, trades unions and academics.

4. Workers who want advice about their workplace rights, including the NMW, or to report abuses of those rights can call the Pay and Work Rights helpline. The helpline number is 0800 917 2368. The textphone number is 0800 121 4042. Information is also available on and

Department for Business, Innovation & Skills

The Department for Business, Innovation and Skills (BIS) is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed. To achieve this it will foster world-class universities and promote an open global economy. BIS - Investing in our future.

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Article Published/Sorted/Amended on Scopulus 2009-09-30 11:24:18 in Employee Articles

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