Dr Michael Koch from the Kent Business School welcomes the government's move to make it illegal for restaurants to take tips given to waiting staff.
‘When a restaurant customer pays a service charge, he or she rightly expects this to be distributed to staff who provide the service. What most people still don’t know is that restaurants are by no means required to do so. On the contrary, many retain the service charge, or deduct a substantial fee from tips paid by card. While this is certainly unethical, it is not illegal.
‘The government now intends to close this loophole, and make sure that staff get tips and service charges. This initiative is coming at a significant delay. After all, the practice of withholding service charges or charging large fees on tips is not recent. Since 2009, service charges, tips, gratuities and cover charges can no longer be used to make up national minimum wage pay. However, except for cash tips, they do not need to be distributed to staff.
‘The government “Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges” from 2009 recommends that restaurants inform their customers about the use of these charges, but the implementation of this recommendation is entirely voluntary. Many customers still seem to be unaware of the issue and staff in many restaurants were even instructed to lie to customers about the use of service charges.
‘After a public outcry in 2015, many high street restaurant chains have reviewed their practices to make sure staff get tips and service charges. However, there is yet no legal requirement to do so, which means restaurants can still keep the service charge, the card tip or parts of it to prop up their revenue.
‘The new measure announced by Theresa May is therefore overdue. To what extent this will improve the income of service staff in restaurants remains to be seen. The restaurant and hospitality sector is struggling, which is illustrated by recent closures of many restaurants belonging to chains such as Jamie’s Italian or Chimichanga.
‘In these market conditions, many restaurants might then have to find other ways to improve their financial sustainability. Until new legislation is in place, the best way for customers to ensure that tips go to the staff is to provide tips in cash.’
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