Victory for 'fair tips, fair pay' campaign welcomed by unions

Restaurants banned from using tips from customers to avoid paying the minimum wage

The Independent's "fair tips, fair pay" campaign scored a decisive victory yesterday when the Government rejected pleas from employers and announced that restaurants and cafés will be banned from using tips to pay basic wages from October.

Employment Relations minister Pat McFadden rejected calls from some of the biggest players in the hospitality industry to delay the scrapping of the loophole in the national minimum wage laws, a move welcomed by consumer groups and unions. The decision will ensure that restaurants can no longer use tips to boost wages that in some cases are as low as £3 an hour.

As The Independent reported last year, several national restaurant chains including Carluccio's, Café Rouge, Strada and Ask, make up basic pay to the £5.73-an-hour required by the minimum wage by using service charges.

Research commissioned by the British Hospitality Association, which represents the hotel and restaurant business, claimed that scrapping the loophole would result in up to 45,000 job losses and cost businesses £450m. Tragus Group, which controls the Café Rouge, Bella Italia and Strada chains, was understood to be lobbying ministers to delay the policy by several years.

But the Department for Business, Enterprise and Regulatory Reform, which carried out its own research, estimated the amount returned to staff would be just £93m, or half of one per cent of wages paid by the companies affected.

Announcing the change yesterday, Mr McFadden pointed out that only a minority of companies were taking advantage of the top-up loophole. "When people leave a tip for staff, in a restaurant or anywhere else, they have a right to know that it will not be used to make up the minimum wage," he said. "It is also important for employers to have a level playing field on wages. This is a basic issue of fairness."

The BHA stressed that it had not opposed the introduction of the legislation but was "concerned" that ministers were acting this year rather than waiting for the recession to subside. "This is not the time to introduce a measure that will increase the industry's wage bill so significantly," it said.

Consumer Focus, the new consumer watchdog, described the Government's statement as "a real victory for common sense".

Elizabeth Carter, editor of The Good Food Guide, advised customers to tip in cash until October to increase the chances of the money going directly to staff. Welcoming the decision, she said: "When you leave a tip for good service, you expect it to be used to reward the staff that served you. Restaurants that use tips to replace wages are not only cheating their staff, but also misleading their customers, so it's high time this practice was outlawed."

The Unite union, which has run a long campaign for fair tips, congratulated the Government "for doing the right thing by low-waged waiting staff". "This is a triumph for the poorly paid in restaurants, bars and hotels across the country, and for Unite's campaign," Derek Simpson, joint general secretary, said. "However, there remains a need for a fully transparent tipping system where 100 per cent of tips go to staff."

After paying staff a basic wage meeting the national minimum, restaurants will still be allowed to keep tips rather than handing them to staff. The Independent is asking all restaurants to state their tipping policy clearly to diners.