Tipping the balance – arguments erupt once again over service charges
NEWS, August 12, 2015
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PizzaExpressBlack.svgThe issue of discretionary service charges and what percentage of these gratuities actually go to the staff has raised its ugly head yet again. This time PizzaExpress are copping it as members of Unite union organised demos this week denouncing the nation’s favourite chain’s policy of charging up to 8% for administration costs on tips left electronically.

They are not the only restaurant group in the UK to adopt this stance – Strada, Zizzi and other members of the Casual Dining Group (Café Rouge, Bella Italia) also deduct an administrative charge for service paid via credit or debit card – while others like Carluccio’s and Jamie’s Italian do not.

Many restaurants operate a “tronc” to pool and distribute gratuity charges among employees. However, the employer can retain some money to cover admin costs, and that’s the source of Unite’s ire. Currently there is no law regarding how the tronc is divided and there have been reports of restauranteurs keeping the service charge without passing any money on to staff, which, while unscrupulous, is not actually illegal.

Andrew Percy, the Conservative MP for Brigg and Goole, proposed a law last year to force restaurants to inform customers where their tips were going and prevent managers taking a share. He says the current state of affairs misleads customers. It’s hard to disagree.

PizzaExpress say the benefit of the tronc system is that tips made by electronic card payment and discretionary service charges, are paid without the deduction of National Insurance Contribution (which is 12.8%). However it also fosters a culture of tax dodging among restaurateurs. If we’re going to be kind to restaurants, a much better solution would be to give restaurants a VAT break instead.

While we here at Harden’s agree that customers should be enlightened as to where their money is going, let’s go a step further – abolish tipping in the UK altogether. We Brits just don’t appreciate having a service charge added to their bill regardless of the quality of the food, staff and overall experience. It is high time we took a lesson from our European neighbours, like France and Italy, where tipping is never expected. In fact, Italian waiters would see it as an insult!

Please join our campaign to Ditch the Tip.


Ufi Ibrahim, chief executive at the British Hospitality Association says: “Dining is all about customer experience and we leave the choice of tipping to the customer. No customer should feel obligated or pressured to provide a tip or accept an optional service charge.

Customers should not feel obligated to tip, especially when service is substandard. Remember that tipping fosters a service culture and it encourages people to work in the industry. Given that hospitality and tourism employs 3 million people in the UK, anything we do to support and encourage those 3 million to keep up the good work is beneficial. ”

What’s the difference between service charges and tips?

An optional or discretionary service charge is a payment suggested by a restaurant or hotel to reward their employees for a great meal or experience. It sets out a specific amount you could choose to pay if you liked your experience – commonly 10 – 12%. This amount is included at end of the bill. As the customer, you are totally free to pay this recommended amount – or more or less than what’s been suggested.

A tip is where the restaurant or hotel hasn’t suggested a service charge. Then the customer decides what additional, optional payment to tip, over and above the amount set out on the bill.

Why not factor the tip into the overall cost of the meal?

If the customer is providing a tip, it is intended to go to the employees. For tax reasons, those employees will receive a greater portion of the sum if it’s provided as a tip or service charge rather than as part of the bill.

A tip or service charge directly benefits employees and restaurants:

  • Optional service charges are not subject to VAT
  • Employees or employees don’t need to pay National Insurance on any tips / service charge payments they receive

Additionally, if the price is included in the cost of menu items, it is no longer optional.

Cash or credit?

There are cash tips – where you pay employees directly the amount you want to.

It’s up to staff to disclose their tips to HMRC.

You usually have the option to add a non-cash tip to your credit card bill at the end of the night. This is paid to the restaurant. If the tip or service charge is non-cash then the restaurant may deduct variable handling charges for costs incurred such as credit card charges, banking charges, payroll etc. Any deductions should be made known to the restaurant staff.

Where does the money go?

Each hospitality establishment will have its own policy. Individual staff either keep their own tips or shares it out between waiting, front of house and the kitchen team.

If hospitality establishments have signed up to the BHA’s Fair Tips Code they should:

1.       Be able to tell you what is deducted as a handling charge

2.       How the remainder is shared amongst staff

3.       The process for distribution of tips amongst staff – e.g. via a staff representative etc.

What is a tronc?

A tronc is an arrangement set up by the employees to pool and distribute gratuities among staff. A tronc is operated by an appointed employee known as a troncmaster who is responsible for deducting pay-as-you-earn taxes.

Let’s just Ditch the Tip?

Please join our campaign to Ditch the Tip!

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