Page last updated at 23:01 GMT, Wednesday, 30 September 2009 00:01 UK

Q&A: New restaurant tipping laws

Waiter race
Will restaurants be racing to change their service charge policies?

New rules on tipping and service charges have come into force in the UK.

It means big changes to the way bars, restaurants and hotels pay their staff.

So how are the rules changing and what will it mean for workers, customers and the hospitality industry?


What are the new rules?

Under the legislation, companies will no longer be able to use tips or service charges to make up a minimum salary.

In the past, some companies had paid workers below the minimum wage and used tips to make up the difference. The British Hospitality Association estimates that up to 20% of all restaurants were doing exactly that.

What will it mean for staff?

Ideally, it should mean workers are paid the minimum wage and a better share of the tips on top of their salaries.

But all waiting staff will have to declare them to the taxman, as they will have to pay extra in National Insurance under the new rules.

Meanwhile, the guidelines surrounding service charges are also changing.

From now on, workers will not automatically be granted a share in any service charge. While tips must be passed to staff, under the law, an establishment can opt to keep the whole service charge for itself.

If any of the service charge does go to waiting staff, the employer is entitled to deduct any administrative costs from the pot.

So staff are likely to welcome the changes - anyone else?

D&D London was one of the first restaurant groups to declare it was abolishing its discretionary service charge. However, an automatic charge will still be added for groups of eight or more.

Many restaurants add service to bills as a supposedly "discretionary" charge for service - a practice that can add 10%-15% onto your bill - although in practice, diners hardly ever refuse to pay this, even if they are unhappy with the service.

Now D&D - which owns Coq de L'Argent, Quaglinos and the Almeida - plans to pool its tips and distribute them fairly to staff.

Chairman Des Gunewardena says he believes the new regime will lead to better service, adding: "This is common practice, for example, in New York and I believe will result in improved service and more satisfied customers."

The Federation of Small Businesses added that closing the loophole would also level the playing field between big and small firms.

"Big businesses have been using this loophole to keep their own costs down, which abuses their customers' trust when they give tips in good faith," the group added.

But there must be people who oppose the changes too?

Critics claim that in a trade already hard hit by the recession, the changes could cost both money and jobs.

As National Insurance will now need to be paid on tips, opponents of the new legislation say an added £130m will have to be found by restaurants to cover these payments.

They also claim that the added costs could lead to as many as 5,000 job losses - or one job in every UK restaurant.

But while the government has acknowledged the new rules are likely to cost the restaurant trade money, it denies it will cost as much as the industry estimates.

And to sort out doubts about who will benefit from tips, it is working on a new code of practice, which should make things clearer to customers.

For the moment, how can you make sure your waiter or waitress gets your tip?

Make sure you pay any tips or service charges in cash and ask the restaurant whether all of the tips are paid to staff on top of the minimum wage.

If you are not happy, do not pay the service charge on your bill - it is usually optional - and also avoid any establishments that do not pass on their tips to staff.

And to make sure staff get their tip, the Good Food Guide recommends leaving an extra tip in cash - although other staff will often share those takings.



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SEE ALSO
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