Service charge scandal: to tip or not to tip?

Should we be giving staff 'gratuities'? And when we do, how much of the service charge do the staff receive? Time Out lifts the lid

  • Service charge scandal: to tip or not to tip?

    Tipping points

  • I have a confession to make: considering I am a professional bar-goer, I am a terrible tipper. But I didn’t realise quite how bad until the other day, when a comment by a disgruntled bartender friend got me investigating the murky world of service charges, tips and gratuities.

    Up till then, I had always believed that the 12.5 per cent service charge you see on many bills in restaurants was a proper tip, destined for the pocket of the person serving me. Having paid that, I thought, I didn’t need to leave a cash tip except in the case of truly exceptional service. Indeed, I’d often feel a bit resentful about being obliged to pay a service charge at all, particularly on the occasions when a bartender had done little more than pass a pint over the bar to me. So it came as a shock to discover that, in many cases, the bartender won’t get that service charge as a supplementary payment. Even if they do, says Dave Turnbull of union Unite, chances are it will only be subsidising an hourly rate, which, without the service charge, would fall below the minimum wage of £5.52 an hour. In other words, the service charge is often used to make up the employees’ shortfall in pay. ‘At the moment, a loophole in the law means that under one system, employers can count tips towards the minimum wage,’ says Turnbull, ‘while under another – known as the “tronc” – they can’t count it towards minimum wage, but they can avoid paying National Insurance on it.

    'Either way, it’s confusing for customers, it’s confusing for the waiters and, we believe, it’s a situation which some unscrupulous employers are deliberately exploiting.’

    According to some reports, even Gordon Brown – whose party introduced the minimum wage in 1999 – was not fully aware of this loophole until earlier this year, when Unite joined forces with MP Michael Connarty to present him with a dossier on the subject.

    But while we wait to see if the government goes any way to reform the system, what is the best path of action for a customer wanting to reward good service? Turnbull’s answer is simple: ‘Ask where the service charge and tips are going, and if the tip you are leaving is in addition to the minimum wage. If the tip or service charge goes to the staff, then pay it in cash rather than by credit card, as credit card tips legally belong to the employer.’

    Even then, it seems there are unscrupulous employers who will dip into the cash tips, according to one waitress I spoke to.

    70 FXX thsanks.jpg‘I used to work at a café in Kentish Town where all the tips went in a pot which only the owner had access to, and then he’d refuse to hand them out,’ says Laura [not her real name]. ‘One week I’d done 18 hours and I asked for tips but he said I hadn’t worked enough hours to get any. Some weeks I worked out I was getting less than £5 an hour. I eventually left because of that, but I think one of the reasons they got away with it was that so many of the staff who worked there were foreign – there were two Russian girls in the kitchen who hardly spoke any English at all – God knows how they knew what they should be getting.’

    And badly paid staff won’t stick around, damaging the industry for servers and customers alike, argues Henry Besant, the man behind award-winning London bars including Green & Red and Lonsdale. His solution is to pay more in the first place. ‘At Lonsdale, we take the service charge – which is 12.5 per cent on all drinks not served at the bar – but we pay a higher salary, which the staff all negotiate individually. And the result is better staff loyalty and ultimately better service.’

    But that doesn’t mean the customer is off the hook, according to Besant. ‘This country needs to learn how to tip,’ he argues. ‘That’s the single biggest thing that would improve the service industry, since if the staff were paid better, they would look at it more as a career and then standards would rise.’

    And yet as everyone knows, the Brits are notoriously bad tippers, particularly in comparison to our American cousins, who view tipping – even on bringing a glass of water – as all but mandatory. Not that that’s done much to improve things for the customer, argues Simon Difford, author of a series of international bar and cocktail guides.

    ‘I think tipping like they do it in the US is a terrible thing,’ he says. ‘It’s not about getting better drinks, it’s more like a levy. Fifteen per cent is standard – although I tend to tip 20 per cent, but I do that everywhere – and that’s not a tip, that’s a tax. With the US system you’re removing any kind of incentive for providing good drinks and good service. In the US I don’t see tips as having improved the drinking environment. Why
    don’t they just put 15 per cent on the drinks and be done with it?’ he argues.

    I put this question to several UK bar managers, and while everyone agrees it’s the obvious solution, no one can give me a satisfactory answer as to why it hasn’t been done. Reading between the lines, I’d say many are reluctant to change the current system, mainly because it offers a (perhaps too) flexible way of paying your staff, and a means of listing food and drink at prices that look cheaper than they actually are.

    For now, then, bartenders are reduced to scrounging for tips with the aid of props like the tip tray. A personal bugbear of mine, these little tin trays, so beloved by posh gastropubs, turn the tip – something you originally might opt in to out of goodwill – into something that you must opt out of, stirring up resentment on both sides.

    ‘Certainly sometimes the trays are just used by bar managers wanting to give a higher impression for their bar,’ admits bartender Gregor de Gruyther, who’s worked at some of London’s best known bars. ‘But the pay levels being what they are, it’s something we’re forced into, really, so I’m ambivalent about it. The industry has been pushing a lot lately for the introduction of a qualification system for bartenders to make it a better career with better wages. But at the moment a bartender has a maximum six years on the market – and when you look at it like that, well, you’re gonna be putting out those trays.’

    Service charge tips

    Your rights, according to Peter McCarthy of Consumer Association helpline Which? Legal Services (01992 822 800/

    Why do service charges vary?

    It is up to each business whether they make the service charge compulsory or optional and what percentage to levy.

    Do you have to pay it?

    A business that adds a service charge must state this in a prominent place – on the menu, or on a sign on the wall, for example – where you can see it before you make your order. If this has been done then you are obliged to pay it, unless service has been really exceptionally bad.

    What if the service is poor?

    If a problem with service does arise – there is a long delay between courses, say – you should alert the management to it as soon as possible and give them a chance to put things right.

    The last resort?

    If alterting the staff or management to a problem with the service does not solve the problem, you can in theory withhold a suitable proportion of the service charge (though the proportion is hard to quantify). Alternatively, you can pay the service charge ‘under protest’ with the intention of claiming it back later in the courts – something you must state in writing at the time. But you should bear in mind this could take six to nine months and a court hearing – so it’s definitely best to resolve the situation some other way.