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Government urged not to rush tipping legislation

06 August 2008

The British Hospitality Association (BHA) has called on the government to conduct a thorough consultation into legislation relating to tipping.

Earlier this year, the government announced it planned to amend existing regulations so tips can no longer count towards paying the minimum wage.

However, Bob Cotton, chief executive of the BHA, said at present its members employ a variety of methods and procedures for paying employees, including using discretionary tips to supplement wages.

Reforms to the process are expected to mean some businesses are required to "readjust" their wage structures and business models, Mr Cotton explained.

"We need a consultation period to work out what it is that the government is going to do, that is going to stand up in the courts," he asserted.

Employment lawyers found previous attempts made by the industry and the Inland Revenue to reconcile the minimum wage with a tronc system of payments were not supported by existing national insurance and minimum wage legislation, he added.

Closing this "loop hole" may require a "specific act of parliament", Mr Cotton noted.

The current minimum wage set at £5.52 per hour is being increased to £5.73 on October 1st this year.

James Townsend, senior associate in the employment team, comments: "On 13 June 2008 in HMRC v Annabels (Berkeley square) Ltd & Ors UKEAT/0562/07/RN, the Employment Appeals Tribunal (EAT) provided employers with much needed guidance as to whether or not tips given by customers should count towards an employer's obligation to pay the National Minimum Wage.

"The EAT concluded that where restaurant or bar service charges are paid by the customer to the employer but are then paid into a troncmaster's bank account for distribution by him/her in accordance with a tronc scheme agreed between troncmaster and employees, the sums distributed to employees are not 'paid by the employer' for the purposes of being included in the National Minimum Wage Calculation."

"This is a welcome decision, not only for staff working in the hospitality industry but also for patrons who have no wish for their (often discretionary) gratuities to pay towards supplementing an employer's statutory obligation to pay a minimum wage to their workers. The decision also provides clarity as to the amounts employers must pay workers in the hospitality industry."