Get the basics right and then tip the balance
A conundrum, that's what it is. The whole issue of tipping is a conundrum, a hard question, a riddle riddled with loopholes, tax demands and operating profit.
Tipping has come up for discussion again because, according to the Transport and General Workers' Union, some hotels and restaurants are using tips to push low rates of pay above the minimum wage. In the case of one high-class London establishment, the basic starting salary is £1.95 per hour below the legal minimum, but this is deemed legal because the hotel's pay system takes into account tips paid to staff by customers.
On the face of it, this seems outrageous. But, before we get too upset about an apparent abuse of the employees' right to earn a decent hourly wage without having to worry about how many customers they serve, there are many different angles to the tips argument to be considered. It is, as I say, a conundrum.
Most of the industry's trade associations are in favour of including customers' gratuities as part of staff wages. In other words, tips should be collected, pooled and shared out equally as part of the payroll. In evidence submitted to the Low Pay Commission earlier this year, the British Hospitality Association argued that "people who receive tips… regard them as part of their income" and, therefore, "tips should count towards the National Minimum Wage calculation". The Restaurant Association takes a similar view.
But the Inland Revenue, while treating tips as income for taxation purposes, says that they should not be regarded as remuneration from the employer and, hence, should not become part of the wage calculation.
Staff working front of house usually want to be rewarded directly for their good service and like to pocket all tips (hopefully, without paying tax). But staff working back of house also deserve a share of the "extras". They benefit only if tips are pooled and shared out equally.
Most customers like to think that their carefully calculated reward for good service is going to the troops on the front line. They would be disappointed to learn that, in some cases, their gratuities are a calculated part of the wage bill.
The argument about what should happen to tips is muddled by culture, tradition, tax, rising wages and, occasionally, by employers' greed. But, at the end of the day, one principle remains perfectly clear - if we want to attract decent staff into this industry, we have to pay decent basic wages, irrespective of the extras that may or may not be delivered.
It's time to get around the table and sort this one out; time to get an industry code of practice. If the issue of tipping is not resolved by the industry, it will be sorted out for the industry. With the radar of Whitehall, particularly the Treasury, beginning to look at that £20 note left on the table, you can bet all the tips in the world that the conundrum will be solved by legislation. And, in the current legislative climate, that could mean payment of the minimum wage, with tips added as a taxable extra. n
Forbes Mutch
Editor
Caterer & Hotelkeeper
