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Government rejects job loss argument against tipping reform

06 May 2009 by
Government rejects job loss argument against tipping reform

The British Hospitality Association's (BHA) warning that 45,000 jobs could be lost when the practice of using tips to top up the minimum wage is made illegal has been rejected by an official government study.

The Department for Business has vowed to close the loophole that allows hospitality operators to pay staff less than the minimum wage and make it up with tips, with the proposal expected to become law in November.

The BHA has urged the Government to delay the move because of the recession, after a report it commissioned by the Centre for Economics and Business Research found that 45,000 jobs could be at risk as a result of the change in the law.

But this finding has been contradicted by the Department for Business, which has conducted its own review. It estimated the cost of bringing in the change at £92m, only 0.5% of the wages bill of the companies affected, while the BHA put the cost at £450m.

The Government claims its estimate is more accurate than the restaurant industry's because it was based on a survey of 140,000 workers, a bigger sample than the BHA's survey of 40 companies.

The BHA based its figures on a "pay gap" of £2 an hour between workers who received less than the legal minimum and relied on tips, while the Department for Business calculated this figure at 90p an hour.

The BHA, which is standing by its own figures, insists that it backs the change in the law and is working on a new code of practice to ensure more transparency over tips for customers.

"In order to reduce the risk of job losses and business failures, the industry needs time to adjust its financial and operational models," it said.

45,000 jobs under threat if practice of making up wages with tips is banned >>

Hospitality operators plead with Government to delay tipping law >>

Can we justify using tips to top up staff wages? >>

Government confirms staff must be paid minimum wage >>

For more, see our tips round-up >>

By Daniel Thomas

E-mail your comments to Daniel Thomas here.

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