Industry leaders have urged the Government to not rush through proposals to ban hotels and restaurants from using tips to make up the national minimum wage (NMW).
The Government last week opened a consultation on the proposals, which followed a long-running union campaign. The consultation, which closes on 16 February 2009, will also look at ways of improving information for consumers.
Employment Minister Pat McFadden said: "When people leave a tip they expect it to go to staff on top of their pay, not to be used to make up the minimum wage."
Peter Davies, senior manager at business advisory firm Vantis, warned that the proposed changes could cost businesses up to £73m a year in additional wages and national insurance.
"Even hospitality businesses whose current rate of salary is above NMW levels are likely to be affected, as an inflation-busting salary rise in certain businesses is bound to risk demands for higher wages across the sector as a whole," he said.
Robin Rowland, chief executive of Yo! Sushi, questioned whether the Government fully understands the implications of the proposed changes.
"The changes could place a lot of stress on some operators' existing financial models, and under the current difficult climate this could have a serious effect on employment," he said. "If this is pushed through too fast in a stressful time, it could be counterintuitive to the Government's plans."
The British Hospitality Association (BHA) said: "It is vital that the change is implemented in the right way to protect the thousands of employees in the industry whose jobs could be at risk from the increased costs this change will place on businesses during a time of economic downturn."
The BHA added that it is working with its members to develop a best practice guide to ensure customers feel confident about how their tips are used.
By Kerstin Kühn
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