New rules on tipping come into force

1 October 2009

Businesses such as restaurants and bars will no longer be able to use tips to bring staff pay up to minimum wage level, under new rules coming into force today.

Previously, tips and other ‘gratuities’ distributed by employers to staff could be counted towards the national minimum wage, although tips paid directly to the worker by customers could not. From 1 October, the former practice will be illegal.

The government says the move will give thousands of workers a “fair deal” on tips and wages.

“When I leave a tip I don’t expect it to be used to make up the minimum wage,” says business secretary Lord Mandelson. “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.”

The measure is part of new increases to the national minimum wage. Around one million people are expected to benefit from the 7p per hour increase.

Low-paid workers aged 22 and over will receive an increase from £5.73 to £5.80 an hour. Meanwhile, the rate for 18 to 21-year-olds has risen from £4.77 to £4.83 and 16 and 17-year-olds will see their minimum wage increase to £3.57 an hour from £3.53.

Paul Kenny, general secretary of Britain’s general union GMB, welcomes the move on tips, but says focus now needs to be on ensuring businesses implement the rules.

He adds: “In the following months consumers will see a more transparent process where, businesses will have to clearly display their tips policy on menus or outside their premises so that consumers have a real choice.”

Tipping: your rights

Some restaurants may add a service charge (normally 12.5%) to your bill while others will leave the option to tip at your discretion.

If a restaurant chooses to add service to your bill then by law they must inform you of this before you order. Normally, this information is communicated via menus displayed outside the venue and the ones you order off.

The service charges added to your bill are compulsory, and if you have been informed it will be added then you are obliged to pay it. The exception to this rule is when the service you receive is poor; in circumstances where the service didn’t justify the tip, you can refuse to pay some or all of the charge.

However, if the food did not live up to your standards then you can't refuse to pay the tip – this should be taken up in relation to the bill rather than the service charge.

A recent poll by Which? found that nearly 50% of people wouldn't ask for a service charge to be reduced or removed from their bill even if they received bad service in a restaurant.

Elizabeth Carter, editor of the Good Food Guide, says: “Most restaurants say service charges are optional, which means customers have every right to deduct the charge if they've not had good service.”

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