Are Tips illegal???

pickledpink

http://www.unitetheunion.com/news__events/latest_news/unite_celebrates_tips_victory.aspx

I've found something about this tipping business and have posted the link above.

I haven't had time to read through it thoroughly or to follow the links, but it does appear that the service charge should by rights go to the staff.

Those restaurants not complying should be avoided. Those who do comply sign up to a body and display a sticker in their window or on their menu.

I still say the best way to pay for good service is to pay the waiter by cash, and deduct the service charge from the bill.

Anihilator

If that is what the OP is referring to then I am fully of the opinion as previous that he is wrong outwith cash tips.

All it means is tips cant be used to justify paying less than minimum wage and that any tips distributed should have a clear policy in place.

zzzLazyDaisy

Thanks for the link. That article just confirms the position that, since 1st October 2009, employers cannot use tips to make up the minimum wage.

Just to be clear - it used to be common practice for some restaurants to pay a low basic hourly rate - sometimes as low as £2.50 an hour. Cash tips given to staff by customers had to be handed in to the employer, and would then be added onto the wage slip, to make the hourly rate up to the minimum wage.

This practice has now been outlawed.

However, service charges are the property of the business to use as they see fit.

Anihilator

http://www.hmrc.gov.uk/helpsheets/e24.pdf

Game, set and match to me.

I hope all these tips are being declared too

breadlinebetty

zzzLazyDaisy wrote: »

Thanks for the link. That article just confirms the position that, since 1st October 2009, employers cannot use tips to make up the minimum wage.

Just to be clear - it used to be common practice for some restaurants to pay a low basic hourly rate - sometimes as low as £2.50 an hour. Cash tips given to staff by customers had to be handed in to the employer, and would then be added onto the wage slip, to make the hourly rate up to the minimum wage.

This practice has now been outlawed.

However, service charges are the property of the business to use as they see fit.

I've read the article too and it doesn't just say the service charge can no longer go towards the employees wages, it says that the service charge is in ADDITION to the basic wage.

You're wrong on this I'm afraid.

breadlinebetty

Anihilator wrote: »

http://www.hmrc.gov.uk/helpsheets/e24.pdf

Game, set and match to me.

I hope all these tips are being declared too

What are you talking about: game, set and match to you?! You're round the twist.

If as you say tips are to be declared too, then I take it the restaurant will have do that: yes?:D Oh get real mate!

A tip is a gift for good service, and gifts are exempt from tax. I'm sure some dodgy politician would be able to advise the loophole on that one!:rotfl:

Cash tips would be hard to tax, eh?;)

You sound like a very peeved man. Someone on here said you were a traffic warden, and I bet you are too. Nasty little pugnacious thing!

Anihilator

breadlinebetty wrote: »

What are you talking about: game, set and match to you?! You're round the twist.

If as you say tips are to be declared too, then I take it the restaurant will have do that: yes?:D Oh get real mate!

A tip is a gift for good service, and gifts are exempt from tax. I'm sure some dodgy politician would be able to advise the loophole on that one!:rotfl:

Cash tips would be hard to tax, eh?;)

You sound like a very peeved man. Someone on here said you were a traffic warden, and I bet you are too. Nasty little pugnacious thing!

No where on that link does it state that Tips of all natures must be passed on. If you think it does I suggest you learn to read.

And tips etc have to be declared for NIC and PAYE purposes in most cases also when they are being passed on.

pickledpink

Betty,

Ignore anhiliator, he's just a troll. Most members block him so they don't have to read his rubbish. He's got emotional problems, and he gets all his facts wrong. :money:

PeterJDavies

I don't want to get involved in the bickering between posters here, but there is a lot of misinformation and half-truths here.

The reason that HM Revenue & Customs have rules about tips is not to do with who owns them - that isn't any of their business. But there are rules which mean that, although they are always taxable, tips and service charges are not subject to National Insurance if certain conditions are met (paragraph 5, part X, Schedule 3 of the Social Security Contributions Regulations 2001 if you're interested). HMRC get involved to make sure that where businesses claim that NIC exemption then they follow the rules. That is what their E24 leaflet (linked earlier in the thread) is all about. Also discretionary service charges are free of VAT.

Once again you need to read the legislation and legal precedents carefully to understand the real position - not press releases from Unite. Unite are campaigning for a change in the law so that 100% of tips and service charges received must be passed to staff but again - emphasis here without shouting - that hasn't happened as it would require Nerva to be set aside (see my earlier post). If you read the BERR consultation on tips that is admitted on page 60-something. Doesn't matter whether you agree or disagree with Unite - it is a campaign and not the law.

The Government has introduced a voluntary Code of Practice for businesses concerning tips. Note the word voluntary. And even that doesn't stop businesses keeping a proportion of the tips for whatever they want - it just says that if they do then they should tell their staff and customers that this occurs, the thinking being that customers won't pay service in establishments that keep a significant proportion of the money for themselves. But it is not law - it is a voluntary code of practice (I should know, I contributed towards the consultation exercise).

Once again, to summarise - cash tips belong (and have always belonged) to the waiter (Wrottesley v Regent Street Florida case). They have never counted as earnings towards Minimum Wage in any circumstance (Annabels (Berkeley Square) Ltd v HM Revenue & Customs).

Card tips and service charges belong absolutely to the business (Nerva v RLG Ltd, upheld at ECHR as Nerva v United Kingdom). They could count as earnings for Minimum Wage NIC-free before 1 October. Now they cannot - but businesses can still keep this money to help them meet Minimum Wage - just that they and their staff now have to pay National Insurance on it instead.

HM Revenue & Customs rules concern what happens to whatever proportion of the tips/service a business chooses to give to staff (even if less than 100%) and is to do with the exemption from National Insurance.

The Government's Code of Practice is voluntary, not mandatory.

Hope that clarifies things.

pickledpink

Hi Peter,

Thank you for explaining that. It's all much clearer now.

However, a couple of things I'd like to ask you:

1) I feel that restaurants are misleading the public into believing
the service charge is a tip, which goes solely to the waiter who served
you. As this clearly isn't the case, should restaurants not be forced
to print this fact on their menus or bills?

2) I deduct the service charge, and tip in cash. I've never had a
problem when deducting it, and I believe I'm within my rights to do so.
Can I just clarify with you that it is legal? I believe it is, but maybe it
isn't?!

3) Who would be the best people to approach to bring this to the
forefront? Not many people are aware that the service charge
does not go to who they intended, and I think this is morally
wrong and somewhat deceptive on the part of the restaurant.

Regards in advance,

PP