New law to stop tips becoming part of pay

New laws have come into force making it illegal for bars, restaurants and hotels to use tips to make up minimum pay.

Bob Cotton, chief executive of the British Hospitality Association, said individuals working in the industry would also be worse off through having to pay national insurance on more of their wages and 5,000 jobs could go as a result, he told the BBC: "It is going to cost businesses in excess of £100 million. In the short term it will put jobs at risk."

But Business Secretary Lord Mandelson said: "When I leave a tip, I don't expect it to be used to make up the minimum wage. I want it to go to the person who has served me as a thank-you for their service - this is a basic issue of fairness. Tips are meant as a bonus, not a tool to boost pay to the basic minimum."

The change comes into effect on the day that the national minimum wage rises by 7p an hour to £5.80. For 18 to 21-year-olds, the rate increases by 6p to £4.83 per hour.