Tips and the minimum wage

June 16, 2008

I’ve just found out about a case in the High Court regarding the payment of minimum wage and whether tips given to waiters and bar staff in bars and restaurants count towards it. Annabel’s restaurant thinks that having an independent ‘tronc’ system in place, which distributes tips received on credit cards outside of the normal payroll system, means that tips paid in this way count as part of the minimum wage and therefore the standard hourly rate can be less. However the High court has said that Annabel’s should pay the minimum wage regardless of any tips paid in this way. As the High Court is quite a high ruling, the decision has more weight than an employment tribunal decision. Employers need to check that they are paying at least minimum wage for their staff as their basic salary and keeping tips completely separate.

I can’t even believe this situation has arisen to be honest. Call me naive but I can’t believe there’s employers out there trying to avoid paying the basic salary at the rate the Government has deemed reasonable. Tips, as far as I’m concerned, are the equivalent of a performance related bonus – you do a good job and provide good service, and you get that little bit more money. You wouldn’t pay someone less than the minimum wage in an office based job, even if a bonus would increase it to the statutory level. As I understand, this decision means that tips will still be able to count towards the minimum wage if paid through the same payroll system as the salary, which in my opinion is not right. What do you think?

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Posted by hrgirl | Filed Under Employment Law 

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