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Employee tips loophole to be closed

05 August 2008

The law is to be changed so that tips given to staff can no longer count towards an employer's obligation to pay the national minimum wage

The Government has announced that it is to amend existing legislation so that tips given to staff no longer count towards their employer’s obligation to pay them the national minimum wage.

Once the changes take effect employers will no longer be able to use gratuities and service charges left by customers but processed through the payroll to top up staff salaries. This is currently perfectly legal due to a “loophole” in the national minimum wage legislation: a recent media investigation highlighted that the practice of using staff tips in this way was rife among many large restaurant chains.  However, once the changes are brought into effect (expected to be in 2009) the loophole will be closed to all employers, not just those in the restaurant trade. A consultation on the proposed changes will be launched in the autumn.

The minimum wage for adults aged 22 and over rises to £5.73 in October.

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