Page last updated at 23:17 GMT, Friday, 25 September 2009 00:17 UK

New tip rules 'could cost jobs'

By Brian Milligan
Business reporter, BBC News

Waiter holds a plate of food
The government estimates the new rules will cost the industry 60m

New rules on tipping waiting staff could cost restaurants £130 million and as many as 5,000 jobs, the hospitality industry association has claimed.

The new rules, which will make it illegal for tips to be used to make up staff wages, often to the national minimum, come into force on 1 October.

Restaurants will have to pay salaries in full, which will now attract national insurance on the whole amount.

The government has said restaurants will have to bear some extra expense.

But it estimates the amount will be nearer £60m, less than half the amount claimed by the British Hospitality Association (BHA).

It claims the cuts could mean one person per restaurant being put out of work.

"One person's job may not sound a lot. But potentially that's quite a lot of jobs in these difficult circumstances," said Bob Cotton of the BHA, referring to the recession.

The issue has been the subject of a campaign by the Unite union on behalf of waiting staff.

Last year, the BBC revealed that a number of restaurant groups including the Loch Fyne chain were using staff tips to make wages up to the minimum amount. Loch Fyne changed its policy shortly afterwards.


Many restaurateurs think the new rules are misguided because 80% of owners already allow their staff to share tips on top of their salaries.

Neil Robertson of the Institute of Innkeepers and Business Minister Pat McFadden discuss tipping

One such owner is Gerry Price, who runs a gastro pub in Surrey.

"The rogue operators will continue to work outside the system," says Gerry.

"The government would be better off trying to find those rogue operators, rather than a piece of legislation which I don't think is necessary."

Customers at his restaurant, the Inn @ West End, are still confused about who will be getting the benefit from now on.

"It would be nice to know where the money you give in tips is going," says one.

"It should be the staff, without doubt," says another.

Indeed the theory of the new rules is that the waiters, waitresses and kitchen staff should all get a greater share of the tips.

But there is nothing which stipulates that the restaurant must pass the money on to them.

The rule changes may mean some waiters and waitresses could end up getting no extra money as, for the first time, they would have to pay national insurance contributions on the full amount of their salaries.

Code of practice

The industry concedes that something needs to be done to let customers know where their cash is going.

"The new rule is a good start," said Elizabeth Carter of the Good Food Guide.

"But it doesn't go far enough. It hasn't clarified what happens to credit card tips."

Which is probably why the government is getting ready to publish a new code of practice.

This could involve restaurants making it clear on their website what proportion of their service charge goes to the restaurant, and what proportion will go to staff.

Alternatively, restaurants might be asked to print their policy on the menu itself.

"It's about full disclosure," says Bob Cotton, who in the meantime is working on a code of practice himself.

Otherwise one option is to give a cash tip on top of the credit card service charge, as recommended by the Good Food Guide, but you would in effect be paying twice.

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