New legislation that comes into effect this week will force restaurants to decide whether they want to raise prices for food and drinks or face legal action for sharing tips and service charges with employees. The government will introduce legislation on Tuesday, more than eight years after a ban was first proposed. The government will introduce the legislation on Tuesday. This is more than eight year after proposed a ban.
The law aims to increase the earnings of 2 million hospitality workers and waiting staff. It follows a series exposés, including many from the Observer about companies that deducted money meant for kitchen and waiting staff when customers paid by card. Instead of passing the service charge on to workers, luxury chains such as the Ivy Collection chose to increase the hourly wage rate for all employees by a certain amount, regardless of how much they collect during their working hours.
Some businesses still use the optional payment from clients to boost their profits. One London chain, Ping Pong, has banned customers from using card payments to tip staff. However, some are still using the optional payment from clients to boost their profits, and one London chain, Ping Pong, Some hospitality businesses charge up to 15% service fee, and leave it to the customers to decide. This can result in substantial amounts of money at stake. According to a survey conducted by UK Hospitality in 2022, up to a quarter of businesses kept a portion of the service fee to cover their costs.
Kate Nicholls is the chief executive officer of UK Hospitality. She says that businesses are “gradually getting ready” for this and have been moving toward a code of good practice approved by unions.
Many restaurants, however, who are struggling to pay the higher minimum wage, and to keep up with food inflation, will be forced to recover costs associated with the new legislation through increasing menu prices, decreasing portion sizes, or cutting costs in other areas. Saxon Moseley is the head of leisure and hotel at RSM. He says that those who have used service charges to pay their employees or offset some of their wages will still have to pay them, but they won’t have access to this cash fund. In that case, margins could be affected, sometimes quite drastically.
Lawyers say that some businesses have difficulty agreeing on the terms for a “fair share” of tips. Michael Powner, an employment partner at Charles Russell Speechlys says that reaching a deal can be a challenging process. “Employers must ensure that the agreement is ‘fair,’ that rational reasoning is in place and avoid any discriminatory rules.” Bryan Simpson, the Unite’s hospitality worker, expressed concern about businesses that appoint unelected managers and individuals as the heads of tip-pooling comittees. He claimed that some chains were “deliberately misinterpreting” the new fair tip legislation in order to suit their business needs, rather than workers.
He said: “We will do everything we can industrially, legally and politically to challenge any unfair tipping policies.” Rather than gain new rights for optional payments, some workers fear that they will lose out unexpectedly as a result. Pizza Express has been under fire for its distribution of tips. Now, the waiters are required to share a portion of their service charge with the salaried managers, and the shift managers. This is because the chain decided that senior staff had to be included by law, as they sometimes needed to serve tables.
There is no service charge at the restaurant unless there are seven or more people at a table. The restaurant uses a pooling system called “troncs” to distribute the service charge to employees and any voluntary tips. A staff committee, led by a ‘troncmaster’, votes on the exact distribution of tips.
To fund this change, the group reduced the waiters’ share from 70% to 68%. This will also be shared by managers who serve at tables. The remaining 32% will be shared by non-waiters, primarily kitchen staff.
The company intends to review its policy every three months starting in January. The owner of Ivy previously said: “All cash or credit cards tips are kept by the member(s) of the team that received them.”
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