Speaking in the House of Commons yesterday, MP for Brigg and Goole Andrew Percy said the current position relating to tipping was ‘not clear or transparent to consumers’ and ‘unfair to employees’.
“Consumers often do not know whether charges on a bill are mandatory or discretionary. They often have no idea of how much, if anything, the employee will actually receive,” he said.
“There is no requirement in law for service charges or tips to be distributed to employees, and there is far too much confusion over the whole matter.”
Arguing there was ‘strong evidence of widespread abuse’ of the voluntary code of best practice on service charges introduced by the government in 2009, Percy proposed a new Bill on Service Charges, Gratuities and Cover Charges.
The Bill would introduce a Statutory Code for the hospitality, leisure and service sectors, setting out a clear process for the distribution of tips and giving staff more power over who receives a share of the money.
“I propose a model similar to the tronc model that exists for national insurance liabilities,” said Percy.
“Employees themselves will determine how tips and service charges are distributed in the business: if kitchen and bar staff are to get a share, that will be decided by the employees.”
The Bill would also set a maximum percentage that employers could deduct from tips to cover administration fees.
“I believe that there should be no percentage taken by the employer, but there is a view among some that they incur a cost in collection. Therefore, I would seek consultation on that matter,” Percy explained.
In order to improve transparency for consumers, the Bill would require restaurants to display their policy on tips and service charges.
“Under the Bill, a consumer who pays a tip or service charge will know where it is going,” said Percy.
Percy claimed the proposed Bill would ‘protect employees’ rights’, ensuring consistency between workplaces and helping to top up income from minimum wage jobs.
He argued that employers would also benefit from improved staff engagement, which usually leads to higher revenues and reduced staff turnover.
Percy introduced the Service Charges, Gratuities and Cover Charges Bill under the ten-minute rule, which rarely leads to legislation but allows MPs to raise an issue and test Parliament's opinion on it. However, the Commons agreed to a second reading of the Bill on October 17.
In the meantime, the British Hospitality Association (BHA) urged restaurants to follow the voluntary code on service charges and do their best to be transparent about how tips are distributed.
“Restaurants should disclose to customers how they deal with discretionary service charge and non-cash tips, at least by a written note available for inspection at each restaurant and on the restaurant’s website, if there is one,” he said BHA deputy chief executive Martin Couchman.
“This disclosure should cover three key areas – whether an amount is deducted for handling costs (and how much); how the remainder is shared between the restaurant and the employees; and the broad process for distribution, for example, that they are shared between the employees in the restaurant through a system controlled by a representative of the employees.”
Unsure of how to distribute tips fairly? Read our Ask the Experts guide with advice from Martin Couchman.