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Fair Deal on Tips and New Minimum Wage Rates

Small Business News

30th September 2009

Fair Deal on Tips and New Minimum Wage RatesNew rules come into force tomorrow (1st October) to ensure that thousands of workers get a fair deal on tips and wages. (See Tipping: Code of Best Practice)

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."

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