Tipping and the National Minimum Wage

Today we have announced our response to our consultation regarding the change of regulation relating to the use of service charges, gratuities, tips and cover charges in use in payment of the national minimum wage. Since the National Minimum Wage Act came into force in 1999, it has created a level playing field for employers in the payment of wages and an essential safety net vulnerable low-paid workers. Through this we have seen a better rewarded and more committed workforce who have been a force in driving up standards. Under the 1999 Act, the use of service charges, gratuities, tips and cover charges may count towards payment of the national minimum wage in certain circumstances. Some 10 years on, we believe that the time is right to review this practice to ensure equity for workers in receipt of the national minimum wage and a level playing field in the payment wages among employers. In July 2008 we announced that we would be amending national minimum wage regulation to prevent the use of tips towards the payment of the national minimum wage. Alongside this we recognised a need for greater transparency for consumers about what is happening to the tips they leave. We have now consulted on these issues, and we thank all those who responded for their input. The majority of the respondents to our consultation supported the change. Taking this into account and evidence gathered as part of our impact assessment, we believe that now is the right time to make this change. It is our intention that from 1 October 2009 that use of service charges, gratuities, tips and cover charges will be no longer be permitted in payment of the national minimum wage. We will also continue to work with interested parties in developing a way of making information available to consumers. This will include a code of best practice for sectors affected by the change. I have arranged for copies of the Government's response to the consultation to be placed in the Libraries of both Houses.