By Kuba Strycharczyk, of Burnetts Solicitors

Last updated 10:01, Tuesday, 07 October 2008

THE Government has announced its intention to amend the law so that tips can no longer count towards payment of the National Minimum Wage (NMW).

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All workers are entitled to receive the minimum hourly wage.

However, bars and restaurants currently operate a wide variety of practices when it comes to dealing with tips and it depends how these are paid as to whether they are taken into account as remuneration contributing to the NMW (currently £5.52 per hour for adults, rising to £5.73 per hour from 1 October 2008).

Currently, tips paid to a member of staff by a customer do not count as wages for the purpose of the NMW.

For example, this would be the situation arising in a restaurant when the customer gives a tip directly to the waiter.

However, tips paid through the employer’s payroll do count for the purpose of calculating the NMW.

This would be the case where a restaurant adds a service or cover charge to the bill and remunerates employees through the payroll.

The proposed changes will end the practice of employers paying staff an hourly rate below the minimum wage level and then using gratuities and service charges processed through the payroll to ‘top up’ wages in order to comply with the NMW legislation.

The Government also wishes 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 plans will be launched later this year.

Following consultation, it is expected that the law will be changed and guidance issued for both workers and employers in order to ensure smooth implementation of the changes.

The National Minimum Wage rose to £5.73 per hour on 1st October.

Kuba Strycharczyk is a Partner in Burnetts’ Employment Law team.

For further information and for advice on the National Minimum Wage, get in contact with Kuba Strycharczyk on 01228 552222 or visit www.burnetts.co.uk.