Business group welcomes new rules on tipping

1 August 2008

The Federation of Small Businesses (FSB) has applauded new laws proposed by the government that mean tips and service charges will no longer count towards payment of the minimum wage.

The rules, which are due to come into effect next year, will prevent employers from using tips and gratuities to top up employees’ wages so that they meet the hourly rate laid down by the minimum wage.

The FSB said that an overwhelming majority of its members (99 per cent) do not use tips to subsidise wages and that a significant number (85 per cent) are in favour of the legislation changing.

The FSB argued that its members believe the new rules will have a positive impact on their businesses, creating a level playing field between small businesses and big companies.

John Wright, the FSB’s national chairman, said: “Small restaurants want to do the best by their staff. They pay their staff a decent hourly rate. Tips are then an added extra.

“Big businesses have been using this loophole to keep costs down. This is abusing customer’s trust who give tips in good faith. It creates an unfair playing field and means small companies, who pay their staff a decent hourly rate and let them keep tips on top, simply cannot compete.”

Mr Wright added: “The National Minimum Wage is there to create an equilibrium between employers. We support this. Big restaurants are abusing this and relying on customer’s generosity to contribute to otherwise low wages.”