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Government report tips in favour of service staff

In some cases, service charges were being used by employers to meet the minimum wage

Gratuities in bars, hotels and restaurants should go directly to the workers rather than their employers, says a recent report published by the government. Following an eight-month review launched by the business secretary, Sajid Javid, the government has proposed that service charges on bills should be paid voluntarily by customers and that employers should impose only limited charges on staff tips – or even scrap them altogether.

The review came about after it was revealed that service charges were being withheld partially and sometimes entirely from service staff by some well-known British restaurant chains without the customers being aware. This is against the 2009 voluntary code, which was set up to prevent such practices happening.

Some chains deduct percentages of service charges from waiting staff’s sales to be shared among other workers, while others have used tips to pay for shortfalls and breakages.

The government is now looking at various possible actions to make sure staff receive the tips they are entitled to, including:

  • Stopping employers making deductions from tips for any reason other than for tax.
  • Limiting the amount of deductions made to the cost of credit card fees and payroll processing.
  • Barring or limiting percentage charges on waiting staff’s tips.
  • Encouraging tip sharing, which would be managed by a service staff member.

Javid made it clear that workers who earn tips should be able to keep them and voiced his disappointment at the way in which tips are managed by some high-profile chains. He added that the government was yet to decide how to apply changes and whether it should update the 2009 code or bring the code’s rules into legislation.

The union Unite, which helped to expose the tipping practices, called the report a ‘massive, rightful victory’ and believes that a change in law would be a more effective solution than the voluntary 2009 code. Unite’s officer for the hospitality industry, Dave Turnbull, explained that any tips paid by credit card are considered as belonging to the employer, leaving a loophole for employers to use the tips as they like. Until employees are legally recognised as the owners of the gratuities, employers could continue to withhold them from their staff.

The government proposals are also aimed at eliminating the general confusion surrounding service charges. The report revealed that customers were often not aware that service charges are discretionary, while paying a service charge often deters diners from leaving a cash tip. The proposals suggest that service charges could either be banned or that restaurants should be obliged make it clearer that these charges are not compulsory.

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