Top tips on tipping

Anyone working in the hospitality industry knows how important tips are. Not only are they a welcome additional income, but they are also a reward for providing great food or service. So when it was recently highlighted in the press that many high street restaurant chains, including Pizza Express and the Casual Dining Group, were charging staff admin fees for tips paid via card payments people were outraged.

Staff felt that they were being treated unfairly, while members of the public expressed anger that the money they thought was going to the staff was in fact being pocketed by head office. However, those enforcing the fee claimed it was a standard administration charge covering the costs of running a tronc system – the method used to process and distribute card tips through the payroll.

But the backlash following the revelation caused most of the groups to reverse their policy but it has thrown the whole issue into the spotlight.

Now the British Hospitality Association (BHA) has called for the Government to take action against restaurants and hotels who do not disclose how tips and service charges are distributed among staff by bringing in a new law that ensures total transparency on the matter.

The organisation, which represents 40,000 hospitality businesses in the UK, is demanding that new laws are put into place which would mean that the hospitality sector will have to disclose how tips and service charges are distributed to the customer.

Although many hotels and restaurants have signed up to the organisation’s voluntary code of transparency on tips and service charges, the BHA want to make it a legal requirement so customers know what happens to their money, a call which has been backed by celebrity chef Rick Stein.

“For us it’s all about transparency,” said Ufi Ibrahim, Chief Executive of the BHA, which has outlined the proposal in a letter to the Business Secretary.

“Although restaurants are legally entitled to deduct administration costs from service charges, for example, we think it’s important the customers understands exactly how much is deducted and why.

“Customers should be able to reward good service and know where their money ends up and how much of it goes to the staff.”

There is an up-side to the deductions however for workers whose pay comprises basic pay and tips since the employer could then be required to consider whether tips are taken into consideration when calculating holiday pay. And it’s also important to remember that the tips cannot be counted towards the minimum wage.

Cash tips are dealt with differently again. In most cases, as they are given directly to the employee they belong to the employee and the restaurant cannot require them to be handed over, unless the employee has signed an agreement requiring them to do so.

It’s important for employees to remember though that cash tips still count as part of their income and they must declare their cash tips income for tax purposes.