Workplace rights: Topping up with tips

Earlier this year, Starbucks was ordered to repay more than $100m in tips to its Californian 'baristas' (servers).

by Michael Burd and James Davies, Lewis Silkin LLP solicitors -e-mail:
Last Updated: 31 Aug 2010

A judge in San Diego decided the company's outlets had breached state law by allowing supervisors to receive a share of the tips. The level of tipping is less generous in the UK than in the States but it is still giving rise to legal disputes. A major issue is the national minimum wage (NMW). Cash tips given directly to workers cannot count towards the NMW, but it is common practice in the catering industry to take non-cash tips into account for this purpose. A recent case established that tips paid to staff via a 'tronc' - an independent distribution scheme - do not count towards the NMW. But it also confirmed that it remains lawful to use tips paid to staff through the company payroll to top up their pay to NMW level. Another issue is the practice among some restaurant businesses of retaining a percentage of staff tips, on the basis that it reflects the administrative burden of distributing them. The Government has said it will be reviewing the legal position. One possible outcome may be a requirement for employers to be more transparent about their policy on distributing gratuities. At least, that's our tip.

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