From 2009, employers in this sector will have to pay all employees the minimum wage, which will be £5.73 from October this year.
Trade union Unite has pledged to put logos in restaurants where staff get a fair deal on their wages so customers will know staff are being paid the minimum wage and receive 100% of their tips.
Derek Simpson, joint general secretary of Unite, said: "Waiters and waitresses across the country have been hungry for the tips loophole to be closed and the announcement will satisfy their appetites. It is great news that unscrupulous employers will no longer be able to use the tips left for staff to subsidise low wages."
Unite hit the headlines in April over its campaign to change the law over the minimum wage after it claimed that restaurant chain Pizza Express was not distributing tips and service charges fairly.
However, commenting on the announcement over fair tips, a Pizza Express spokesman said: "Pizza Express's policy is to pay all staff the minimum wage or above. It does not and never has used tips to top up waiters and waitresses' wages to meet the minimum wage; all waiters get to keep their tips."
Tips not to be used to form minimum wage
The Government announced that it will close the legal loophole that allows companies in the hospitality industry to use tips to top up salaries.
