Tip for tat: Tipping policy

Chris Losh

Chris Losh

19 January 2016

The summer saw a raft of negative stories about tipping practices in the UK. So what went wrong, and what is the industry doing about it? Chris Losh reports

At the tail end of last summer there was a seemingly endless stream of negative stories about restaurants apparently playing fast and loose with tips and service charges; of exploited waiters, cynical management, and confused and angry customers.

Trade union Unite has been campaigning on the use and abuse of gratuities for years. Indeed, it was their work a decade ago that led to the 2009 legislation making it illegal for restaurants to use tips to top-up sub-minimum wage salaries.

It also led to bodies like the British Hospitality Association (BHA) introducing a Code of Practice covering the application and distribution of gratuities and service charges, even if the union is sceptical that the latter has had much of an impact.

‘The code was meant to address all these issues [recently seen in the press]. But because it was voluntary the restaurants all ignored it,’ says Unite’s campaigns officer Chantal Chegrinec.

This, for sure, is a complex area. Unite, for instance, points out one operator not passing on service charge revenue to its staff. In fact, while such a practice might seem morally dubious to customers, it’s not illegal.

‘It’s a contract between the customer and the restaurant,’ says Martin Lam, former proprietor of Ransome’s Dock, and a man with three decades of restaurant experience behind him. ‘Restaurants can do with [service charge] what they want. If they haven’t agreed to pay it to staff as part of their contract, they don’t have to.’

The problem, of course, lies in the name. Customers who pay a service charge rightly or wrongly tend to assume that the money will go to their waiter or waitress. The discovery that it is, in effect, simply a double-digit addition to their bill leaves a nasty taste in their mouth, however legal it might be.

It is, as Lam points out, ‘a very muddy situation’.

Tips are hardly any clearer. While the basics of the tronc scheme – with all gratuities going into a central pot before being shared out among staff afterwards – are well established, it is rarely this simple.

It’s a quirk of the UK restaurant system that something that should cost £11.25 costs £10 and guests then pay a service charge

Will Beckett

A raft of some of the UK’s biggest high street restaurant names recently came under fire for levying an ‘administration charge’ of up to 8% on all tips paid by credit card. And while a prolonged (and noisy) campaign has seen Zizzi, Byron, Pizza Express, Giraffe and the Casual Dining Group all scrap these charges, Unite says Strada and Prezzo remain defiant.

As one highly experienced ex-sommelier wryly observed: ‘A lot of the big chains rely on the fact that staff are transient to take advantage of both them and their guests.’

Many of the stories over the summer centred on table levies: a system where waiting staff are charged a small fee – typically 2% or 3% – on all table sales. This is then deducted from any tips they might make and paid back into the tronc. So a table sale of £100 and a tip of £10 would see the waiter taking home £7-£8, and returning £2-£3 for other staff bonuses.

Staff at, for instance, Wahaca and Jamie’s Italian might have agreed to this policy when starting work, but there was no shortage of disgruntled former employees happy to talk to the national press last summer about how ‘their’ tips were being ‘stolen’.

Equally, the ‘staff paying restaurants for the privilege of working’ angle proved irresistible to the press, who conveniently glossed over the fact that these paid-back tips were not simply being pocketed by the restaurant, as was implied, but being used to pay bonuses to kitchen staff.

No simple solution
Both the service charge and the tips systems are poorly understood by customers. And, given the range of schemes available, it’s perhaps not surprising that diners tend to think the worst – even when it’s not justified.

‘It’s a quirk of the UK restaurant system that something that should cost £11.25 costs £10 and guests then pay a service charge,’ says Will Beckett of Hawksmoor and Foxlow. ‘It doesn’t do anyone any harm, but there’s an insinuation that it all goes to the staff, and people have been surprised that it doesn’t.’

The industry could, of course, follow the example of Danny Meyer, who has banned tipping in his New York restaurants and raised both prices and staff wages to ensure total transparency. But there seems little appetite for such a nuclear option over here; not least because the redistributive nature of the UK on-trade makes for greater fairness than in the Big Apple.

The controversy on tipping doesn’t only centre on transparency, but also on fairness

Dave Turnbull

‘Unless you spend at least half your time working in service you can’t get a tip in New York,’ says Beckett. ‘Waiters can earn $70,000 and kitchen staff $20,000. [Over here] even waiters would find that an odd distinction.’

Plus, while the ‘salary augmented by tips’ system is less than perfect, there are good practical reasons for it – not least the legal avoidance of tax, on cash tips at least. And while customers don’t always understand it, they probably prefer an element of flexibility to hefty price rises. ‘People tend to like things cheap,’ observes Beckett. ‘I’m not sure they’d be comfortable with an across-the-board price hike.’

Given this, the plan currently being put forward to MPs by the BHA – for the voluntary code of practice to be enshrined into law – seems reasonable. If passed, all establishments would have to make it obvious to customers where any money taken in tips and service charge goes, and how much is deducted by way of an admin fee.

Legislation loggerheads
Self-policing, cheap to implement, and effective in addressing the ‘consumer ignorance’ issue, it looks a good option, though not everyone is convinced.

‘Over two thirds of our members were supportive of proposals to strengthen the Code,’ says Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers. ‘But we have not found any evidence which suggests new regulation is required to deliver that.’

Unite, meanwhile, thinks the BHA’s proposals don’t go far enough. ‘The controversy on tipping doesn’t only centre on transparency, which is an important factor, but also on fairness,’ says Dave Turnbull, Unite’s regional officer. ‘One hundred per cent of tips should go to staff, with no deductions.’

The BHA claims to have over 200 MPs onside, and is hopeful of legislative progress in 2016. Should the code become law, whether it goes too far or not far enough, it might at least rescue the on-trade from another summer of pillorying in the press.

‘We have found no evidence of widespread malpractice – on the contrary, our members report good understanding of the issues and compliance with the current code of practice. There appears to be some misunderstanding among members of the public as to how tips should be distributed and some of the reporting over the summer has been sketchy and unhelpful. Pubs, bars and restaurants need to exercise a degree of flexibility in the way they distribute tips.’
Kate Nicholls, ALMR

‘If removing the service charge was legislated I’d be perfectly comfortable with it. It’s the most honest system. But I’m not sure customers would be comfortable with either the logic in front of them in black and white, or the price hikes it would entail.’
Will Beckett, Hawksmoor and Foxlow

‘The French abolished the service charge 15 years ago. Prices went up across the board – but I’d be in favour of that. It’s the only solution. You can’t convince a mortgage lender that you can earn tips unless it’s included in your payroll. It makes the job of a waiter third-class.’
Martin Lam, ex-Ransome’s Dock

‘The BHA seems to be clinging to the increasingly outdated notion that deductions for admin purposes are a standard industry practice. The usefulness of transparency would be to highlight those still engaging in unfair practices rather than somehow legitimising them, which seems to be the BHA approach. Unite wants to see the introduction of primary legislation to ensure that staff are given 100% ownership rights of their hard-earned tips, with control over how they are shared out and no interference from the employer.’
Dave Turnbull, Unite

‘We propose that it be made compulsory that restaurants should disclose to customers how they deal with discretionary service charge and non-cash tips – at least by written notice available for inspection at each restaurant and on the restaurant’s website.’
British Hospitality Association

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