Approval over action on unfair practices by big businesses.

 The Federation of Small Businesses (FSB) warmly welcomes the Government’s announcement that restaurants and bars will no longer be able to pay below the minimum wage and make up the difference using employee’s tips.

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

Members believe it will have a positive impact on their business and are keen to create a level playing field between small businesses who pay a fair hourly rate, and big companies who use tips to avoid paying wages.

Small restaurants want to do the best by their staff. They pay their staff a decent hourly rate. Tips are then an added extra.

John Wright, FSB National Chairman said, “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.

Background

 “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,” he continued.

In April the government resolved to look into laws around tips in restaurants, saying it was "not clear" if owners who kept a share were breaking the law.

The Department for Business, Enterprise and Regulatory Reform (BERR) agreed to undertake the issue after UK's largest union, Unite, campaigned to stop service charges being diverted into restaurants' takings, or being used to "top up" salaries to make the minimum wage.

Today's announcement

John Hutton, the business secretary, today said regulations around minimum wage laws will be tightened up.

He said in a statement, "I am really pleased to announce we have decided to change the law so tips received by staff must be paid on top of the national minimum wage, not as part of it. Customers who leave a tip want it to go to staff. They don't expect it to be used to subsidise owners paying the minimum wage."

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