The Government has confirmed that from 1 October 2009, new regulations will be introduced to prevent any payment of tips from counting as "earnings" towards the NMW. This is regardless of the type of tronc system in place and/or whether all payments are processed through a single payroll.
Under present law, service charges, tips, gratuities and cover charges that are not paid to workers through an employer's payroll do not count towards the NMW. However, when such payments are collected by the employer and are paid through the payroll, these amounts do count towards the NMW.
As stated above, from 1 October 2009, none of the above payments will count towards the NMW.
This will cost the industry a vast amount of money, not least in extra National Insurance Contributions. This may very well lead to significant job losses.
Employers will still be able to keep a proportion of tips or service charges for themselves. Many companies may well do this in order to off-set the additional costs they will now incur.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.