Unions have welcomed a change in the law which prevents bars and restaurants using customer tips to bring staff pay up to the minimum wage.
Ministers said changes will be made to stop the controversial practice of employers using tips and service charges to top up workers’ wages to make sure they earned the statutory adult rate of £5.52 an hour.
Paul Kenny, general secretary of the GMB union, said: "GMB members working in the hotel and catering industry have fought a 10-year campaign to end centrally collected tips being counted by their employers toward the national minimum wage and they will welcome this move.
"Far too many rogue employers have been using tips to make up the minimum wage. The quicker this is ended completely, the better."
The Government’s Business Secretary, John Hutton, said: "When people leave a tip, in a restaurant or elsewhere, they expect it to go to service staff and as consumers, we’ve got a right to know if that actually happens."
Fergal Dowling, partner and head of employment law at the Birmingham office of Irwin Mitchell, had taken up the cause following claims that some of Britain’s biggest restaurant groups were using loopholes in the law to top up the earnings of waiting staff.
"Under the law, restaurateurs are entitled to manage tips, or service charges left by credit card," said Mr Dowling. "Unfortunately, as a result many restaurants are taking all or large parts of the charge as an administration fee which goes straight into company funds.
"If the service charge is on the bill as discretionary or optional the company does not have to pay VAT on the money. However the rules for cash tips are different.
‘‘Unless a system run by employees is in place to pool and distribute the cash tips, any money left on a table is legally the property of the waiting staff."
Another union, Unite, said its campaign to bring transparency to the tipping system in bars, restaurants and hotels, would continue.
The union plans to display its Fair Tips logo in bars and restaurants across the country as a symbol that they pay their staff at least the minimum wage with 100% of tips on top.
The regulations are expected to be changed next year.