Tips should go to workers, not employers, says government report

Staff at Jamie's Italian — 'Restaurant staff should get the tips, not the employers.' Photograph: Lucy Young/REX/Shutterstock

Tips in restaurants, hotels and bars should go to workers and not their employers, the government said in a report published on Monday.

After an eight-month review of tipping practices, the government said charges imposed on staff tips by employers should be scrapped or limited. Service charges on customers' bills should also be clear and voluntary, the proposals said.

The business secretary, Sajid Javid, launched the investigation ^[1] last August after some of Britain's best-known restaurant chains were exposed for withholding some or all of the service charges from staff – often without customers' knowledge.

Unions accused businesses such as Pizza Express and Giraffe of abusing the 2009 voluntary code set up to stop tips being used by employers to meet the minimum wage. Pizza Express, which took 8% of tips paid on a card, and Giraffe, which charged 10%, have said they will stop doing so.

Chains such as the Mexican street food outlet Wahaca ^[2] and Jamie Oliver's Jamie's Italian ^[3] have also deducted a percentage of waiters' card sales to be shared with other workers, but other restaurants have used tips to pay for breakages, till shortfalls and customers failing to pay.

Waiting staff — The government is considering banning emplyer deductions from tips. Photograph: Alamy

The government is seeking views on options to ensure staff get more of their tips including:

Banning employer deductions from discretionary service payments other than for tax.
Limiting such deductions to the cost of processing credit card tips and dealing with the payment through payroll.
Banning or restricting employers from charging waiting staff a percentage of their table sales during a shift.
Encouraging properly managed "troncs" – arrangements for sharing tips administered by a staff member, not the employer.
^[7]

Publishing the report, Javid said: "We want workers who earn a tip to be able to keep it. That's why I, like many others, was disappointed by the tipping practices of some of our well-known chains. This has to change."

Javid said the government would decide whether to make changes by revamping the 2009 code or, to give the rules more weight, enshrining them in legislation.

The Unite union, whose campaign helped expose restaurant chains' treatment of tips ^[9], said the report was a "massive, rightful victory" and called on Javid to change the law instead of relying on the voluntary code.

Dave Turnbull, Unite's officer for the hospitality industry, said: "The problem has always been that tips paid on a credit card and service charges ^[10] are deemed the property of the employer. Until staff are recognised as the lawful owners of their hard-earned tips with complete control over how they are shared out, rogue employers will continue to cream off staff tips."

The proposals also attempt to clear up confusion and dubious practices around service charges ^[11] added to bills that often go to the employer and not staff. There is no legal requirement for any part of these optional payments to be paid to employees.

The government said customers often did not understand the charges were at their discretion and that they deterred diners from leaving a tip on top. Businesses could be banned from adding a service charge or forced to make it clearer that the charge is discretionary.

Cover charges imposed by the restaurant also need to be made clearer so consumers know what they will pay, the government said.