§ Mr. Richard Shepherdasked the Secretary of State for Social Services how his recent decision that earnings in the catering industry which are derived from a service charge are liable for national insurance contributions will affect the benefit entitlement of individuals.
§ Mrs. ChalkerUnder regulation 19(1) (c) of the Social Security (Contributions) Regulations 1979, gratuities which are286W either not paid or not allocated—directly or indirectly—by an employer to his employees are not liable for national insurance contributions. The Department had hitherto assumed that this regulation covered payments derived from service charges. My right hon. Friend's recent decision was based on legal advice, which he accepted, that service charges are not a gratuity, and are not therefore covered by the regulation.
It is not possible for the Department to identify from its records all those whose benefit entitlement may be affected because their employers have not deducted contributions on payments derived from service charges at any time since April 1975. Where an individual believes his employer has not deducted contributions from such payments, and that he may lose or have lost benefit entitlement as a result, he should inform his local DHSS office. If investigations show that contributions have been underpaid and that benefit entitlement is affected, the Department will estimate the underpayment of contributions and adjust the individual's contributions record accordingly; any past underpayments of benefit will then be rectified. Other cases which come to the Department's notice will be investigated to the extent that is reasonable in the circumstances.
I regret that there is no way in which the Department can identify all the individuals who may be affected. We shall, however, seek widespread publicity so that individuals are alerted to the situation and can take action themselves.