New legislation increasing the minimum wage and making it illegal to use tips and service charges to
make pay up to this level will mean a change in practice for many businesses in Nottingham Fraser Brown
solicitors warns. The new rules, which come in on the 1st October 2009, will have an impact on various
sectors and especially the catering and hospitality industry.
Whilst the change is an attempt to offer those working in the service sector fairer standards and to
bring business practices into line with customer expectations, the negative implications for businesses and
even employees themselves have been significantly overlooked, says Tony Russell, Partner and Head of
Employment at Fraser Brown.
He said, "Business owners must be aware that a change in practices, contracts and policies may be
necessary as tips and service charges must be paid to employees in addition to the national minimum wage.
From the 1 October, this will increase by 7p to £5.80 for those aged 22 and over."
"These changes will affect employees and businesses alike. The practice of using tips to top up
wages is often seen as a form of exploitation of service sector employees, but this is not the case in many
instances. The government levy on tips to make them taxable earnings meant that licensees began using them
to top up wages in an attempt to avoid the higher national insurance costs for employees."
"As well as impacting on employees the change is set to cost businesses and extra £92.5 million per
year in labour costs and national insurance contributions alone and this at a time when the industry is
already struggling due to lack of consumer spending in the wake of recession. Additional costs will also be
incurred because of changes to payroll and accounting procedures which employers must ensure are brought in
line to meet legal expectations."
For further information about Fraser Brown’s employment team or to find out more about ensuring you have
the relevant policies and procedures in place, visit www.fraserbrown.com or call 0115 988 8777.
Fraser Brown is a dynamic law practice working at premises in Nottinghamshire through its branches in Nottingham, Radcliffe on Trent and Bingham.
Its philosophy is to deliver superior legal advice through a personal and highly professional service for both commercial and private clients. Since 1990, Fraser Brown has acquired eight established and respected local firms as part of its major growth strategy for doing business in the 21st Century.
Fraser Brown is one of the region's longest established firms of solicitors. Over the last 12 months, it has experienced significant growth in areas such as property, contract work, construction and general litigation.