Tipping: industry welcomes Government crackdown on 'unfair' practices

Business secretary Sajid Javid announced earlier this week the beginning of a two-month consultation period on possible ways to increase transparency about where diners' tips are going and guarantee service charges go directly to staff.

One of the actions being considered by the Government is the adoption of a statutory code of practice in place of the current voluntary code, which could be taken into account in court or tribunal proceedings.

It also asked for input on how to best encourage operators to adopt 'tronc' schemes that allocate tips across employees based on agreements among themselves.

Ufi Ibrahim, CEO of the British Hospitality Association (BHA), said: "Transparency is precisely what we asked the Government to consider – customers should be able to reward good service and know where their money ends up and how much of it goes to the staff."

Revelations​

The BHA previously called on Javid to make it a legal requirement for pubs and restaurants to tell customers how tips were distributed among staff, following revelations last year that some restaurant chains were holding back some or all tips meant for staff.

Echoing the BHA's comments, the Sustainable Restaurant Association (SRA) added that it strongly supported any proposals to ensure a 'fairer regime' on tipping.

SRA managing director Mark Linehan said: "The UK dining public's attitude to tips and service charges is straight forward: it demands that staff are treated fairly and that restaurants are utterly transparent about what they are charging customers and where the money goes."

Linehan pointed to a survey undertaken by the SRA in 2014, which found fair treatment of staff to be the top sustainability issue diners cared about when eating out of home, warning that a lack of transparency over tipping practices was bad for the industry in the long run.

"Customers crave and deserve transparency. Service charges are optional and discretionary and so a continued failure to match these expectations by communicating clearly, will be bad for business as, ultimately, diners will refuse to pay them," he added.

Abuse​

However, the Association of Licensed Multiple Retailers (ALMR) said it had conducted a detailed survey of 7,000 of its members last year and found no evidence that any of them were abusing the current tipping system.

Kate Nicholls, chief executive of the ALMR, said: "Tips and gratuities are an optional reward in recognition of excellent service and they do go to the highly skilled, hard-working people who provide our guests with a great experience."

But, she said it was right that operators had 'freedom and flexibility' to reward all team members rather than just an individual member of staff.

"With the rise of cashless transactions, customers are increasingly rewarding good service through credit card payments – these have to be processed through the company payroll in order to ensure that tax is properly accounted for and paid – this is not the case with cash tips where the individual has to declare the tax and it is this that has led to some confusion and we welcome measures to increase transparency.

"It means that there will be a deduction, but it means that everyone receives a fair share, including the tax man. No company should be profiting from tips and service charges, but equally no company – particularly small businesses – should be penalised for collecting and processing tax on behalf of the Government."

Various high-profile figures in the hospitality industry including prominent food critic Jay Rayner have called for an end to discretionary service charges altogether.

Rayner has argued that businesses should charge more for dishes in place of accepting tips and use increased profits from those dishes to increase staff wages.

The consultation period will end on 27 June. Read the Government's full document​.