Do tips and service charge count towards minimum wage? What a pub or restaurant must pay in base pay from April 2026

"Do tips count towards minimum wage" is a question owners ask when a payslip looks generous: a modest hourly rate plus a healthy tip share that adds up to more than the legal floor. The rule is plain and has been since 2009. Tips do not count, so the base rate has to clear the minimum without them.

What the rule says

HMRC's National Minimum Wage manual states that tips, gratuities, service charges and cover charges do not count towards national minimum wage pay. That covers all four: a card tip, cash left on the table, a discretionary service charge and a cover charge. It applies whether the money goes through the employer's payroll or through a tronc.

The manual describes three cases:

• The customer pays the worker directly, not through the employer. It has no effect on the minimum wage calculation.
• The employer handles the payment. It is treated as part of the worker's remuneration at first, then taken out when the minimum wage pay is calculated, so it still does not help.
• The service charge has lost its identity. The manual's example is a 10% charge added to restaurant bills and paid into business takings. It is no longer an identifiable payment to staff, so it does not affect the calculation either way. That is a case for checking the whole arrangement against the tips rules, not a way to count the money.

Before 1 October 2009, service charge paid through the employer's payroll did count. It no longer does, and older advice that says otherwise is out of date.

The 2026 rates the base pay must clear

The age bands matter for rotas: a worker moving from 20 to 21 moves from £10.85 to £12.71, a rise of £1.86 an hour, from the date of the birthday. See hiring under-21s in a pub for how that plays out on a bar rota.

The check, worked

Take a 21-year-old on a bar, 30 hours a week, paid £12.00 an hour, with a tip share of £35 a week.

The payslip total of £395.00 clears £381.30, which is how the mistake hides. The test is the base figure, £360.00, and it fails. The fix is to raise the hourly rate to at least £12.71, not to add more tips.

Run the same sum for every worker, using their own age band and their own paid hours, including any hours worked before opening or after closing. Our figures assume a straightforward hourly worker; salaried staff, accommodation offsets and unpaid breaks change the calculation, and we have not worked those here.

What to do

Check base pay per worker. Strip tips, service charge and cover charge out of the pay line and divide what is left by hours worked. If the answer is under the rate in the table, it is below the minimum.

Keep tips on their own payslip line. The tips rules set out how they must be distributed and recorded; the what counts as a tip guide helps with the edge cases. Mixing them into the hourly rate is how the base figure gets lost.

Price the rise before the Christmas rota. The rota cost calculator adds employer National Insurance to a higher base rate so the extra hour costs show up before the shifts are set.

What we could not confirm

We have not found a published figure for how far back arrears must be paid, or the penalty for a first underpayment, in the sources we read for this guide. Acas and GOV.UK both give routes for a worker to raise a pay query; read those before offering a number to a member of staff.

Overlyft can set up an assistant that reads your payroll export each pay period, strips out tips and service charge, divides base pay by hours worked for each person and flags anyone under their age-band rate, with the working shown for you to check. You can do the same check in a spreadsheet for nothing.

Rates are for England, Scotland, Wales and Northern Ireland and are those published for April 2026 on the date shown. This is general information, not advice.