Allowing tips to top up staff pay to minimum wage levels will be illegal from October this year, the government has announced.

The government says it will also be working towards greater transparency and clarity for consumers by introducing a new industry code of best practice.

The announcement is the government’s response to a consultation on the use of tips, gratuities, service charges and cover charges in payment of the national minimum wage.

Employment relations minister Pat McFadden says: “When people leave a tip for staff, in a restaurant or anywhere else, they have a right to know that it will not be used to make up the minimum wage. It is also important for employers to have a level playing field on wages.

“Our consultation showed wide support for these changes, including from business groups, and we are working with them to ensure that consumers get the information they need.”

A spokesperson for restauranteur Pizza Hut says: “We are pleased that the government has finally closed the loophole that allows employers to top up staff wages with tips. We have always ensured our employees receive 100% of their tips on top of wages and have been calling for an industry commitment to fair tips for some time.”

Paula Rogers, managing director at hospitality staffing firm Admiral, told Recruiter that good agencies should speak to their clients about tipping procedures before placing temps.

“Employers run the tips in different ways in different places and the temps think that if tips are there to be earned that they should be entitled to them.

“I always talk to the client and ask the client what they tend to do and ask what is going to ensure that the permanent staff are happy so that they do not begrudge the temps their tips.

“If you have a good relationship with your client you work it out so that everybody is happy.”

Tim Harris, associate at Management Search Executive, adds: “Recruiters do need to ask the question of what system the client has in place. It is turning into a tip-driven industry. Recruiters need to get as much information to candidates as possible.”