Restaurant industry split over plans for fair tipping

Unions back Theresa May’s announcement that staff will keep 100% of tips but employers say the law is unnecessary. By Nick Hughes.

News last week that Theresa May will legislate to ensure that restaurant workers keep 100% of their tips has divided industry opinion. The Unite union heralded the announcement as a long-overdue victory for waiting staff, coming as it did a full 826 days after the government consulted on proposals to make tipping fairer and more transparent. UKHospitality, however, warned that legislation would be burdensome for employers already facing escalating costs and was unnecessary in light of new voluntary measures.

The debate over tipping was ignited by a series of revelations in 2015 that some employers were deducting an administration fee from customer tips paid on a credit or debit card, typically between 8%-15%. The practice was legal and was often used to offset their own costs, but many thought it was contrary to the spirit in which tips were given by customers. The then Department for Business, Innovation and Skills (now BEIS) brought forward proposals for consultation in May 2016 that included preventing or limiting employers from deducting a percentage of discretionary payments for service, and updating or making mandatory a 2009 code of practice that most respondents to an initial call for evidence said was not widely used and didn’t go far enough.

A survey carried out by BIS at the time found that even though there was no legal requirement for employers to pass on any of the service charge, the vast majority of customers wanted the entirety of their tip to go to the worker.

Then the Brexit vote happened and the issue toppled down the government’s to-do list. Yet the revelations of dubious practices kept on coming. This summer, workers at some TGI Fridays outlets staged a series of walkouts in a dispute over a new tipping policy, whereby a proportion of money paid as tips on credit and debit cards is redirected to back-of-house staff in lieu of a pay increase.

Now the issue is back on the government’s agenda with the prime minister vowing to introduce primary legislation in England, Scotland and Wales stipulating that all tips must go to the workers providing the service, a policy that the Labour leader, Jeremy Corbyn, announced in June this year.

The Unite regional officer Dave Turnbull welcomed the move but said the “devil would be in the detail” of the legislation and questioned whether it would deal with the “myriad of scams” some restaurants employ to recover a proportion of tips from staff.

Unite has previously highlighted other common practices that direct tips away from workers, including employers that levy a charge of 2%-3% on waiting staff table sales to be covered by tips, or require that tips and service charge payments cover the cost of breakages, till shortages and customers who leave without paying.

Yet the UKHospitality chief executive, Kate Nicholls, believes the industry has already addressed concerns about the treatment of tips when the issue was first raised. UKHospitality and Unite have developed a new industry code of practice which deals with the fair distribution of tips among all staff, not just waiters. Nicholls says that, as a result, best practice has been widely promoted across the sector.

The new code focuses on the use of troncs – a common fund into which tips and service charges are paid for distribution to the staff – and aims to make the process of allocating tips more independent and transparent.

Yet despite co-creating the document, Unite says it doesn’t go far enough in addressing the wider issues around tipping practices. “Unite has always said that the joint code is a good first step but its focus is on making tronc schemes fair and transparent,” Turnbull told Footprint. “It does not address the myriad of tipping scams or wage abuses that has allowed bosses to pocket workers’ tips, or the lack of transparency that continues to confuse diners and workers alike. This legislation is needed to level the playing field to ensure that the code can work fairly for both workers and employers.”

In response, Nicholls says the joint code provides fair and transparent guidance that has been readily adopted by the sector. “The examples that have been scrutinised in the media in recent days relate to arrangements that are, in some cases, three years old and have since been addressed by the companies using this code. Another merit of the code is that it is a workable example of representatives of employees and employers having easily come to an agreement – an embodiment of the very spirit in which fair tipping ought to be implemented.”

For the moment at least, the government has sided with the union. And with the further announcement last week of an end to freedom of movement and a deprioritising of low-skilled migrant labour under a future immigration policy, foodservice sector employers have plenty to chew on as the crucial Christmas trading period looms.

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