A hotel owner who increased his staff's pay to at least £9 an hour by scrapping service charges and giving employees a share of the profits said the decision has led to a more productive - and happy - workforce.
Harry Cragoe, owner of The Gallivant hotel in Camber, East Sussex, said he believed it was "unfair" that staff who worked in the restaurant would receive tips while employees elsewhere in the company would not.
As a result, the establishment has become one of the first in the UK to alter its pay structure to pay staff at least the National Living Wage.
Speaking to the Huffington Post UK, Cragoe said that when staff were told about the new pay structure, "everyone spontaneously clapped".
Cragoe said that he did not believe that the previous salary system was a fair reflection of the work each person carried out within the company.
He said: "It was just completely unfair for, let’s say, a housekeeper to be paid £6.70 and get no share of the tips when a waiter was being paid maybe the same wage but being on a huge chunk (of the service charge).
"The housekeeper is as important in terms of offering a customer a great experience as a waiter."
He added: "I don’t think it (the old system) pays people on performance but on a title and the length of service.
"It should be based on individual performance and how happy you make the customers."
Cragoe, who has owned the hotel for the last five years, said that the restaurant no longer adds service charge to the bill, but has amended some of the prices on the menu.
Cragoe said that he had been "overwhelmed by the positive reaction" he's received from customers, who are informed of the price alterations - and the reasons why - by a note inside the menu.
The hotel owner said that the new structure has had an affect on his staff's mentality and how they tackle their day-to-day tasks.
He said: "Everyone is going to take a share of the profits at the end of the year.
"We have seen that people are working more cohesively together. Everyone is now helping everyone else out more diligently and more collectively because they care about what happens to the business."
News of the hotel owner's decision to hike up staff's salary comes as Welcome Break becomes the latest company to announce that it will pay the new National Living Wage to all its workers - regardless of the age.
The move will result in some of the motorway operator's staff receiving a 33% pay rise.
The Government's new rate of £7.20 an hour for over-25s comes into force on April 1.
Yet Welcome Break said the National Living Wage will be the minimum starting rate for all of the company’s 5,000 employees across its 27 sites - including those under the age of 25.
In October, Government Minister Matthew Hancock suffered a backlash after saying workers under the age of 25 are not "productive" enough to warrant being paid the new higher wage.
Welcome Break's decision to include its entire workforce in the new salary scheme will mean that about 2,000 people will receive the National Living Wage, as well as those above the government's age threshold.
Welcome Break said the move, from April, will cost £4 million. It is the first of the UK’s major motorway service operators to make this commitment.
Welcome Break chief executive Rod McKie said: "We are dedicated to offering dependable jobs to the very best people available, and pride ourselves on ensuring Welcome Break is a great place to work
"If you want to attract the best people you need to reward them accordingly, and as such we've made the decision to give all of our employees, regardless of age, the national living wage.
"This is alongside the excellent career development opportunities with our world-class brand partners and a host of other benefits all our employees receive."
All staff at service stations including South Mimms, Michaelwood, Corley and Membury will be paid the new hourly rate.