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Tips to be banned from making up the minimum wage

The practice of using tips to bring workers’ pay up to the minimum wage is to be made illegal as from October.

The government has made the decision after a consultation on the use of tips, gratuities, service charges and cover charges.

The current regulations mean that employers can add service charges or tips to raise employee pay to the minimum wage provided the tips are paid by employers to workers through the payroll.

Announcing the decision, Pat McFadden, the employment relations minister, said that the consultation had revealed broad backing for a change to the rules.

Mr McFadden commented: “When people leave a tip for staff, in a restaurant or anywhere else, they have a right to know that it will not be used to make up the minimum wage. It is also important for employers to have a level playing field on wages."

He added: “This is a basic issue of fairness. We do not believe employers should be able to use tips meant as a bonus for staff to boost pay levels to the legal minimum. Our consultation showed wide support for these changes, including from business groups, and we are working with them to ensure that consumers get the information they need.”

The government also committed itself to drawing up an industry code of practice on tipping so that there would be greater transparency for consumers.