Coalition shelves plans to ensure restaurants pay staff their tips

Restaurants were accused yesterday of exploiting a loophole in a new law designed to ensure that staff receive the tips left by customers. In 2008, the Labour government bowed to The Independent's "fair tips" campaign by banning employers from counting tips towards the national minimum wage.

However, trade unions say that some workers in big chains are being charged an administration fee of between 8 and 14 per cent of their weekly tip income, even though other chains administer tips without charging their staff.

Few chains are being open about their new systems, and, according to the unions, some restaurants have also used the change in the law to avoid paying 12.8 per cent national insurance contributions on tips by claiming the payments are administered independently by staff when they are not.

The new Government appears, however, to have shelved plans for a review of an industry code introduced a year ago, despite its having been a "total failure", according to Dave Turnbull of the Unite union.

"Workers expected their employers to hear the demands of consumers last year to pass all the money they intended for staff to them," he said. "Instead, many businesses have chosen to continue business as usual and profit from the gratuity charges."

Yesterday David Cameron was challenged about the review and employers' practices during Prime Minister's Questions.

The Labour MP Michael Connarty, who raised the issue, said later: "There was a cross-party consensus to change the minimum wage regulations to ensure customers' tips went to staff in the hospitality industry ... Good employers are being shamed by the rip-off employers who still think their hard-working staff are there to be cheated of their customers' tips."

Mr Cameron said in the Commons: "It is right that tips should be distributed to staff. They should not be used to top up the minimum wage [or] be diverted in any way. Enforcement officers should take action to ensure that doesn't happen."

He advised Mr Connarty that the Labour MP should meet ministers at the Business Department to make sure the hospitality industry is meeting the code.