London Restaurants Exploit Admin Charges to Dodge Tipping Law

London’s restaurant sector is under renewed scrutiny as prominent establishments have begun adding significant “admin charges” to diners’ bills. These fees, unlike traditional service charges, do not benefit waiting staff and are instead retained by the business. Critics allege that this practice enables restaurants to bypass newly enacted legislation requiring tips to be distributed fairly among employees.

The shift comes in the wake of the Employment Allocation of Tips Act 2023, effective from October 2024, which mandates that all service charges paid by customers must be passed on to staff after tax and national insurance deductions. The law was hailed as a hard-won victory for hospitality workers, promising greater transparency and fairness in tip distribution. While the intention was to protect staff incomes, restaurant owners have countered with an alternative fee structure designed to recoup operational costs without technically classifying surcharges as tips.

One notable example is L’Antica Pizzeria, which reportedly applied a 12.5 per cent admin fee to a customer’s bill, increasing the total cost of a meal from £69.20 to £77.85. The fee, according to staff, covers items such as card machine expenses and general running costs. This move is mirrored by other venues including Harrods, where a £1 cover charge has been introduced, and the Wolseley, which levies a £2 cover fee, despite both continuing to apply a traditional service charge as well.

The Unite union and hospitality staff representatives have condemned the widespread addition of these charges, labelling them a “blatant” form of tip theft that undermines the spirit of recent legislation. They argue that by substituting tips and service charges with admin or brand fees, businesses are depriving employees of their lawful share, shifting the financial burden of rising costs onto customers.

Restaurant owners, meanwhile, point to escalating financial pressures including higher minimum wages, rising national insurance contributions, and surging expenses for food, energy, and consumables. Some operators insist flat charges are necessary to remain viable and allow them to avoid raising menu prices across the board. At the London Steakhouse Company, for instance, a managing director explained that a cover charge was introduced to help offset everyday costs like linen, with a policy to remove the fee if customers express objections.

Transparency has become a focal point of the dispute. Some restaurants explicitly state surcharge policies on their menus and inform guests of all fees prior to payment. Yet the evolving landscape has led to confusion among diners and disquiet among front-of-house staff, with concerns that tips and take-home pay continue to be eroded despite recent reforms intended to secure them.

With ongoing challenges facing hospitality and a sharp increase in closures predicted, the debate over fair pay and transparent billing practices looks set to intensify even as businesses and employees alike struggle to navigate the new financial terrain.