Is it time to move on from tips?

07 October 2010 by
Is it time to move on from tips?

Has anything changed a year on from the new rules preventing tips to be used to top up staff pay? The Unite union, for one, certainly doesn't think so. Chris Druce reports

Last week, the Unite union declared, in its usual understated way, that the new rules brought in a year ago to stop hospitality operators using tips to top up staff pay had "totally failed".

After a media and union backlash, the Labour government banned the - completely legal if ethically questionable - practice of using non-cash tips to top up staff pay to national minimum wage levels.

With 165,000 businesses in the hospitality, leisure and service sectors where tipping is common - with restaurants, hotels and bars making up about 80% - this was no small deal to an estimated 1.3 million workers.

However, a year on, Unite claims too many hospitality operators are still not passing on 100% of tips to staff, saying that the voluntary code of conduct developed with government and the British Hospitality Association (BHA) is not worth the paper it's printed on.

"Unite members working in restaurants, hotels and bars across the county have seen establishments increase the percentage of service charge they deduct from their pay packets.

"Workers expected their employers to hear the demands of consumers last year to pass all the money they intended for staff to them. Instead, many businesses have chosen to continue business as usual and profit from the gratuity charges," said Unite officer Dave Turnbull.

little change

Unite claims that little has changed in real terms for workers and claims too many operators have failed to accept the principle that customers expect all tips, in whatever form they are left, to go to the staff that serve them.

This is, however, no more than a principle, and while it is indeed illegal to use any tips to top up a worker's wages, service charges are the business owner's to do with what they wish. Operators also remain perfectly within their rights to deduct an administration fee to cover card transaction costs.

Nevertheless, the union is not satisfied and has called on the coalition government to take another look at the law around tips, although a spokesman for the Department for Business, Innovation and Skills seemed less than enthusiastic, responding: "The law is clear - tips must not be used to make up the national minimum wage."

A spokesman for the BHA refuted Unite's central claim that the rule changes had failed. He pointed out that all the major restaurant brands had signed up, in some form or another, to the code of practice, with tipping policy explanations now common on menus in major chains where they remained conspicuously absent before, helping address the original issue surrounding tipping of transparency.

"We always said changes would be slow but things have improved for the better and, to our mind, there is no need to revisit the issue," said the spokesman, who conceded progress in the fragmented independent sector had, due to its structure, been mixed.

additional cost

And the move has introduced additional cost - the BHA estimated £450m last year while the Government claimed £92m - at a time when hospitality operators could ill afford it.

Peter Davis, senior manager at tax advisory firm One E TDI, said that even if the government wanted to legislate on tips to make sure 100% went to staff, it would likely struggle as the European courts ruled in 2002 that the service charge remained the businesses to do with what they want, and that European law on this issue was entirely compatible with UK law.

"What hasn't happened, which the unions expected, is the groundswell of public support for the issue to force operators to fix their ways. The media dropped tips as an issue and the public appear to have moved on," said Davis.

"Also, the expectation amongst staff generated by the unions and media that they would be significantly better off from 1 October 2009 didn't happen. Many businesses said they couldn't afford the increase and made other legal changes to offset it. While some may be guilty of protecting profits, many restaurants and hotels were forced to do this to prevent redundancies."

action taken by best known names

Despite Unite's central claim, there has been movement in the past year by many of the sector's best known names, many of whom had come in for plenty of stick from campaigners.

Carluccio's has raised basic pay for all staff to at least minimum wage and ensured 100% of tips now go to the waiters, while D&D London has removed its 12.5% service charge from bills.

Wagamama and Mitchells & Butlers-owned brands such as All Bar One have joined the likes of PizzaExpress in explaining their tipping policy on their menus or at the bar.

Pizza Hut, Canteen and TGI's have responded to Unite's and others calls and now make sure 100% of tips go to staff.

code of best practice's aims

Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges, aims to:

â- Be transparent to consumers and employers about how tips are distributed.
â- Ensure that employees understand the tipping policy in place and know where to direct customers for additional information.

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