New laws in the UK have come into force making it illegal for bars, restaurants and hotels to use tips to make up employees minimum pay and Bob Cotton, the CEO of the British Hospitality Association, believes individuals working in the industry would also be worse off through having to pay national insurance on more of their wages.

The government has claimed the change will promote “fairness” for staff, despite claims it will cost the hospitality industry an estimated £100 million and thousands of jobs.

The BHA estimates that 5,000 jobs could go as a result but the UK Business Secretary Lord Mandelson says “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.”

A code of practice will be published aimed at providing “clarity” for customers and staff as well as businesses from tomorrow.

The switch has been welcomed by the union Unite, which had been campaigning on the issue, as a move towards greater transparency on how tips and gratuities are used by the hospitality sector.