Where do your tips go?

19 November 2008

Restaurants will be banned from using tips to top up their staff’s wages to the minimum wage in light of a government investigation into how fair tips really are.

Following concerns about what proportion of tips actually go to waiting staff, plus a campaign by union Unite to make tipping systems more transparent, the Department for Business, Enterprise and Regulatory Reform (BERR) has launched a consultation into the issue.

It plans to pass laws that will ban employers from using tips or service charges towards staff’s wages. In addition, restaurants will be forced to make it clear how tips are distributed.

Pat McFadden, employment relations minister, says: "When people leave a tip they expect it to go to staff on top of their pay, not to be used to make up the minimum wage. This is an issue of fairness and common sense.

"We also want employers to make it clear how they distribute tips so that customers know where their money is going.”

Unite has been campaigning to ensure serving staff in restaurants, hotels and bars receive 100% of the money left for them.

Derek Simpson, joint general secretary at Unite, says decisive action is now needed: "The government must take urgent action to close the minimum wage loophole. This will ensure rogue employers can no longer use money left by their customers, to thank those who served them, to boost their profits.”

Tipping: your rights

Some restaurants may add a service charge (normally 12.5%) to your bill while others will leave the option to tip at your discretion.

If a restaurant chooses to add service to your bill then by law they must inform you of this before you order. Normally, this information is communicated via menus displayed outside the venue and the ones you order off.

The service charges added to your bill are compulsory, and if you have been informed it will be added then you are obliged to pay it. The exception to this rule is when the service you receive is poor; in circumstances where the service didn’t justify the tip, you can refuse to pay some or all of the charge.

However, if the food did not live up to your standards then you can't refuse to pay the tip – this should be taken up in relation to the bill rather than the service charge.

A recent poll by Which? found that nearly 50% of people wouldn't ask for a service charge to be reduced or removed from their bill even if they received bad service in a restaurant.

Elizabeth Carter, editor of the Good Food Guide, says: “Most restaurants say service charges are optional, which means customers have every right to deduct the charge if they've not had good service.”

What happens to your tip?

In most cases the best way to tip is to leave cash. According to Unite, money left as a tip on a credit or debit card is legally the property of the employer and can be used as they wish. The concern is that some employers may take a cut of their staff’s tips rather than pay them 100% of the money left to reward them for the good service.

Although there is currently no legal reason why employers can take a cut of staff’s tips, many justify it ethically by charging an admin fee for processing tips and ensuring they are fairly distributed. Unite says this fee can be up to 15% of the money received.

Another system sometimes used (and abused) in restaurants is to pool tips, where all the money is collected and distributed on a points system. Again, the concern is that managers or employers might award themselves the most points.

Plus, the matter of who receives the tips can cause problems. A tip is recognition of great service, not of the quality of the food or wine. But, according to Unite, a growing number of outlets include kitchen staff and bartenders as benefactors of tips. The union claims this is done to lessen the impact of increases in the minimum wage.

Finally, if a glass is broken, a customer leaves without paying or the till is sort at the end of the night, some waiting staff may find their tips reduced as a result. Unite says such deductions are immoral and should never be allowed to happen.

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