New laws on tips and pay in force

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New laws have come into force which make it illegal for bars, restaurants and hotels to use tips or service charges to make up a minimum salary.

The government said the change would promote "fairness" and "clarity" for staff, customers and businesses.

But the British Hospitality Association has claimed the measures will lead to rising costs and job cuts.

The change comes into effect on the day that the national minimum wage rises by 7p an hour to £5.80.

For 18 to 21-year-olds, the minimum wage increases by 6p to £4.83 per hour.

Tips are meant as a bonus, not a tool to boost pay to the basic minimum Peter Mandelson, Business Secretary <a class="" href="/2/hi/business/8281191.stm">Q&A: New rules on tips</a>

The government has conceded that the changes governing tips will lead to an estimated £60m in extra costs to ensure the legislation is implemented properly - particularly as the new code will lead to higher National Insurance payments.

Added costs?

However, the British Hospitality Association (BHA) estimates the new rules could lead to an additional £130m in costs and as many as 5,000 job losses.

Despite the claims, the government has hailed the new salary rules for waiters as closing a legal loophole.

"When I leave a tip, I don't expect it to be used to make up the minimum wage. I want it to go to the person who has served me as a thank-you for their service - this is a basic issue of fairness," said Business Secretary Lord Mandelson.

"Tips are meant as a bonus, not a tool to boost pay to the basic minimum."

The switch has been welcomed by the union Unite, which had been campaigning on the issue, as a move towards greater transparency on how tips and gratuities are used by the hospitality sector.

The move has also been welcomed by the Federation of Small Businesses, which said the new rules and minimum wage helped create "an equilibrium between employers" big or small.

However, while the GMB gave its backing to the new regulations on tips, it also warned that getting them properly implemented should now "become a top priority".