The Law Surrounding Tips and The Minimum Wage

[Guest]

Many places in St Andrews pay waiting staff less than minimum wage, with tips 'topping up' their pay. This loop hole may be closed in the future but until then just remember that after your student discounted meal.

[zipporah]

Many places in St Andrews pay waiting staff less than minimum wage, with tips 'topping up' their pay. This loop hole may be closed in the future but until then just remember that after your student discounted meal.

Really? Is that, well, legal?


The way I looked at it in the US was that a minimum tip was necessary for even average waitstaff to bring them up to an acceptable wage. You could argue that that's not the customer's responsibility, but the system is so ingrained in the US that it's not going to change any time soon. Why make the waitstaff suffer because you disagree with another country's wage laws? Considering that a meal is usually cheaper in the US than in the UK, a 10% (or even 20%) tip often doesn't make that much difference to a Brit anyway.

[househunter]

The current UK loophole is this. Imagine you're a waiter earning minimum wage and that the minimum wage is say £800 a month. If in one month you earn £400 in tips then the restaurant will pay you £400 with the other £400 topped up with your tips, making up to the minimum wage. If in another month you earn £800 in tips, then the restaurant pays you nothing as you've earned your wage in tips. This way the staff always technically get paid minimum wage even if the restaurant isn't paying it themselves.

It's a shitty system and it should be banned in my opinion.

When I was a student at St Andrews I managed to get promoted to head server at one of the 5 star restaurants in town. Nowadays I'm a fairly big snob when it comes to service in restaurants. Even if the food is amazing, if the service is shit I'll be put right off.

The main things I hate are:

1. Not acknowledging guests if they are waiting to be seated; even if it is busy at least say you'll be with them very soon.
2. Asking every 2 minutes if everything is OK. I understand that policy in most restaurants dictates that this has to asked once within the first 2 minutes of the food being served, but some places ask more than once by multiple staff because they haven't communicated the fact that the table has been checked.
3. Tell me what's off the menu when you hand out the menu. I really hate it when I've been thinking about what to get for a good 5 minutes only to be told "sorry we're all out today", at that point I'll be resigning myself to second best and I'll be thoroughly pissed off.

Despite what I said about tipping earlier, I virtually always tip unless the service has been utter shite. Even if the food is crap I'll tip if the service is good as it's not the waiter's fault if the chef can't cook.

[eagle]

The UK National Minimum Wage is calculated by hour. Tips are added on top of the minimum wage.
If your employer is paying you less than the minimum wage, but is topping up your wage with tips (voluntary or compulsory), you'd better check the legality of this.

[Guest]

The UK National Minimum Wage is calculated by hour. Tips are added on top of the minimum wage.
If your employer is paying you less than the minimum wage, but is topping up your wage with tips (voluntary or compulsory), you'd better check the legality of this.

It's a loophole mate, therefore technically legal. From my experience it is practice in at least one St Andrews restaurant, I could not believe this either and it is shocking. Such unscrupulous practice also extends to managers who are only given bonuses if costs are kept to a minimum, this can lead to questionable practices such as 'recycling' products not fit for sale and other questionable practices as well as untold stress on the individual. Keep all this in mind next time you go into a restaurant.

[Thackary]

I found this:
http://www.hmrc.gov.uk/nmw/#b

Now show me evidence of this loophole you talk about. Just because someone does it doesn't mean that it's legal.

[Guest]

I found this:
http://www.hmrc.gov.uk/nmw/#b

Now show me evidence of this loophole you talk about. Just because someone does it doesn't mean that it's legal.

I found this:
http://news.bbc.co.uk/1/hi/business/7533863.stm

Not the most conclusive evidence, I'll admit. Just because you have trouble believing it doesn’t mean it can’t be true.

[Guest]

I found this:
http://www.hmrc.gov.uk/nmw/#b

Now show me evidence of this loophole you talk about. Just because someone does it doesn't mean that it's legal.

I may be naïve and inexperienced in the complexities of politics – however I doubt that the government is going to put details of possible loopholes into its general literature and websites.

[Duggeh]

The UK National Minimum Wage is calculated by hour. Tips are added on top of the minimum wage.
If your employer is paying you less than the minimum wage, but is topping up your wage with tips (voluntary or compulsory), you'd better check the legality of this.

It's a loophole mate, therefore technically legal. From my experience it is practice in at least one St Andrews restaurant, I could not believe this either and it is shocking. Such unscrupulous practice also extends to managers who are only given bonuses if costs are kept to a minimum, this can lead to questionable practices such as 'recycling' products not fit for sale and other questionable practices as well as untold stress on the individual. Keep all this in mind next time you go into a restaurant.

No, its illegal. It's not a loophole, its not a dodge, its illegal. If your employer is doing it, they're breaking the law.

[munchingfoo]

Did you read the BBC news story he gave as evidence Doug? It seems you are wrong and he is correct.

[Frank]

I did read the story, but there was no sort of indication as to what the loophole actually is. Thus whatever's going on in St Andrews 'said' to be the loophole, might not actually 'be' the loophole (and thus still be illegal).

Sometimes I wish I was a lawyer. Not often. In fact, almost never.

[Al]

It is illegal. The High Court have ruled that tips are not to be used to ensure an employee is paid the minimum wage.

[Stu le taxi]

A guidance document on the relevant government department's website states:

"Only tips, gratuities, service charges or cover charges which are paid by the employer to the worker through the employer’s payroll count towards the national minimum wage. Tips given directly to the worker by a customer do not count towards national minimum wage pay.

"Tronc payments made directly to the worker from the tronc master do not count towards national minimum wage pay."

I think the tronc system is some kind of pooled tips scheme, and I think this was what was clarified in the High Court judgement.

Thus it would seem that as long as you give the tip directly to the waiting staff then it's irrelevant as regards the minimum wage.

Tips paid to the employer (which I assume would cover a service charge or suchlike) and then distributed via the payroll does count towards the minimum wage, and presumably this is the loophole that the Government intends closing.

[munchingfoo]

Do you know the date of that Ruling?

[bdw]

The starting point for any research into the application of the National Minimum Wage ("NMW") should really be the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 1999 (SI 1999/584) (the "NMW Regulations").

The query here relates to the nature of remuneration that will be applicable when determining whether the NMW obligation of an employer has been satisfied (Part IV of the NMW Regulations). Two regulations are of particular note in this regard. Regulation 30 provides that, when making such determination, "all money payments paid by the employer to the worker" must be accounted for.

However, regulation 31 excludes from the determination "any money payment made by the employer to the worker representing amounts paid by customers by way of a service charge, tip, gratuity or cover charge that is not paid through the payroll".

By virtue of the above regulation, the current legal position is that tips, service charges, cover charges and gratuities can be considered as counting towards the employer’s obligation to pay NMW when they have been paid by the employer through its payroll, applying the Court of Appeal's decision in Nerva v RL & G Ltd [1997] ICR 11, the basis of such decision being that service charges and tips paid through credit cards or by cheque were the employers' money when the payment to the workers was made. Conversely though, the employer may not include such tips, service charges, cover charges and gratuities within the total consideration that is to determine whether it has satisfied its NMW obligation where:

(a) they are paid by customers directly to the workers; or

(b) they are collected by a troncmaster (for example, the head waiter in a restaurant) and then distributed to the workers. This was the matter in dispute in The Commissioners for Her Majesty's Revenue and Customs v (1) Annabels (Berkeley Square) Limited (2) George (Mount Street) Limited (3) Harry's Bar Limited UKEAT/0562/07, where the Employment Appeal Tribunal held on appeal that tips and service charges distributed between workers had not been "paid by the employer" when they had been paid from troncmasters' bank accounts. As Stu le Taxi suggested, troncs are means of pooling and distributing service charges, tips and gratuities to workers in the catering industries, usually by way of the accumulation of such tips etc in, and distribution from the account of another employee (the troncmaster).

However, as the BBC report indicates, BERR is preparing a consultation on the practice of accounting for tips and, according to its July release, expects regulations to be implemented to clarify the position in 2009 (though the current economic situation may delay or derail this initiative).

[munchingfoo]

It's both legal AND illegal. God, I love the law.

So - to summarise - if your employer reduces your wage because of cash tips, then they are breaking the law. If they reduce your wages because of credit card tips, they are not. * **


* unless you are paid tips by credit card from a bank account which is not that which your employer uses to pay you your minimum wage entitlement. (unlikely in St Andrews - but maybe at the big hotels)

** The law will almost certainly be changing next year - keep your eyes peeled.

[LonelyPilgrim]

Even if the law changes, I doubt the practice would change much. Exactly who is going to be double-checking the accounting? Unless the employee's pay stub has a break down of what part of their pay for that period is coming from NMW requirements and which part is coming from tips, they'd have no way of knowing the difference. And even if such a breakdown were provided, there can be no mechanism in place to ensure that it is accurate. I see every incentive for the restaurant to cheat on their accounting here since the only piece of paper that could easily be used as 'evidence' against them is one that they themselves prepare.

Incidentally, in the U.S. there is a seperate minimum wage for tip-based employment. Like all minimum wage laws is varies by state, but in Indiana I believe it's around $2 an hour. Hence, unlike as was mentioned earlier, employers in the US do not short their tip-based employees vis-a-vis the minimum wage laws - the law itself is written in such a way as to require restaurant staff and other tip-based workers to require tips in order to make a living wage. Hence why we Americans tip so much for everything.

And don't get me started on the minimum wage for farm workers... (hint: it doesn't exist...)

[Daniel]

BTW, which restaurants in St Andrews do this?

Daniel

[Delts]

All I have to say on this is that if you are being paid below minimum wage then you are being screwed over. Unlucky but don't then bitch about it. Go find a job that isn't being run by some cheap scumbag and tell everyone not to use the place where you work. No customers means no business and people like that need to learn.

[Guest]

All I have to say on this is that if you are being paid below minimum wage then you are being screwed over. Unlucky but don't then bitch about it. Go find a job that isn't being run by some cheap scumbag and tell everyone not to use the place where you work. No customers means no business and people like that need to learn.

Don't go getting all high and mighty son, can you tell me how many places in St Andrews use this system? How many of them do you eat in? Exactly how easy do you think it is to find a suitable part time job in St Andrews that is compatible with your studies and social life? The majority of those who work under this system are not doing it to pad out their CV, they are doing it to make ends meet and pay their own way through university, often because they have no one to fall back on financially. The government should not allow this practice to continue and should have taken more effective action sooner, such as ensuring that this loophole was never opened. So the next time that you are in one of these places and see a big group of students acting like a pack of obnoxious Michael Winner's to the staff, just remember that they are not doing it for their own health or out of the goodness of their hearts.