Tips and the National Minimum Wage - an important update concerning payroll payments

Last June we advised that employers using tips to supplement wages in order to bring them to NMW rates should only do so via payroll, and should dispense with any tronq systems. Tronq system tips could not be considered to be wages and could not therefore 'top up' wage to NMW rates. Please see Tips paid by tronc DO NOT count towards minimum wage (June 2008)

Although the details are still patchy, the Government has announced that from October 2009, tips paid via payroll will be treated in the same way, ie they cannot be used to 'top up' wages from the employer to the relevant NMW rate.

However, it is not clear whether this means tips on which NI and PAYE are paid are affected, or whether the decision applies solely to tips paid via payroll but not subjected to statutory deductions.

We will investigate this as a matter of urgency and let you know the outcome as quickly as possible.