New legislation comes into force today (1 October 09) to ensure that thousands of workers get a fair deal on tips and wages. The changes now make it illegal for employers 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 which will boost the pay for those aged 22 and above to £5.80 per hour; £4.83 per hour for 18-21 year olds and £3.57 per hour for 16 & 17 year olds.
The latest increases are in line with recommendations from the Low Pay Commission but are less than in previous years due to the current economic climate. The increases will be welcomed by an estimated 40,000 workers in Northern Ireland, and 1million UK wide, who are being paid at minimum wage level. Most workers including part-time, casual, home workers and agency workers are entitled to minimum wage and the policy is part of the Government’s wider policy of eradicating poverty in work.
Under rules that had been in place since the introduction of minimum wage, in 1999, it was acceptable for employers to use tips and gratuities to make staff wages up to minimum wage levels as long as the monies were distributed through the payroll system. The new legislation closes this loophole and makes it illegal for employers to use tips, gratuities and service charges to bring wages up to the legal minimum.
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.’
With the introduction of this new legislation the Government has now outlawed this practice. Throughout the consultation the changes received wide spread support from business groups, unions and consumer groups. To accompany the changes the Government have launched a code of best practice for the hospitality industry which promotes good tipping practices and ensures that consumers are clear about how their money is being used. It is hoped that the sector will 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 in the future.
The action on tips is the latest development in the 10 year history of minimum wage which in the last year has also seen the introduction of harsher penalties for employers who are caught not paying the minimum wage. Despite the minimum wage now being a long standing statutory right of workers, Northern Ireland still has a history of non-compliance. Since its introduction in 1999, the local HMRC Compliance team have identified over £3million of arrears for 8,000 workers. Workers who suspect that they are not being paid minimum wage can make an anonymous complaint to the HMRC and if after an investigation it is discovered that an employers has not been compliant, workers can receive wage arrears dating back up to 6 years, even after they have left an employer. The changes to tipping will only apply to wages received after 1st October 2009.
For further information and advice, in confidence, about the new rates of minimum wage or the changes to tipping practices contact the Pay & Work Rights Helpline on 0800 917 2368 or www.direct.gov.uk/payandworkrights