Government launches investigation into alleged tipping abuse » SMEInsider

Government launches investigation into alleged tipping abuse

The UK’s hospitality sector is being investigated by the Department for Business, Innovation and Skills (BIS), with business secretary Sajid Javid ordering a formal call for evidence into how business owners divide tips amongst their staff.

Tipping point for UK businesses

The hospitality sector employs over three million people in the UK, and tipping has become a customary tradition within the industry, particularly in restaurants, hotels and bars, with these three areas accounting for 75.6 per cent of tips given to employees. According to the BBC, the restaurant industry has the highest corporate mortality rate in the UK.

The custom is also popular in industries such as hairdressing, casinos and private car hire. Tipping has become more than just a custom in some businesses, with restaurants charging customers a ten per cent ‘optional’ service charge when presented with the bill.

According to BIS, there have been concerns regarding the way tips are distributed by business owners to their employees, ‘‘particularly in relation to the percentage of each payment that goes directly to the employer.’’

Under investigation

Under the instruction of Sajid Javid, the department has launched an official call for evidence, allowing the government to collect information on tipping practices within the hospitality sector, including how tips are collected and distributed.

‘‘I’m concerned about recent reports, suggesting some restaurants pocket tips for themselves. That’s just not right,’’ explained Javid.

‘‘I’ve ordered an immediate investigation to look at the evidence and consider the views of employees, customers and the industry to see how we can deal with the abuse of tipping.’’

Currently, most UK businesses employ a ‘‘tronc system’’, in which business owners will collect all of the tips and then distribute equally. In the case of a restaurant  the waiting staff will usually receive an even portion of 70 per cent of total tips, with the remaining 30 per cent given to the cooking staff.

The government may be looking into companies that charge an ‘administration fee’ towards its staff.

‘‘To cover the administrative costs of ensuring that the tronc system is managed correctly and fairly, a small administrative fee of 8% is levied,’’ stated a spokesperson for Pizza Express. The company states that it does not abuse the tronc system in order to make a profit.

Will anything change?

The call for evidence has already been met with criticism from trade unions.

Dave Turnbull, an officer for Unite, is pleased with the government’s stance on tipping abuse, but feels that Javid should go further with his investigation and tackle the tipping administration fee.

‘‘Capping admin fees will simply legitimise the underhand practice of restaurants taking a slice of staff tips and be near enough impossible to enforce,’’ commented Turnbull.

‘‘Rather than tinkering around the edges, Sajid Javid should be looking to scrap what is effectively a tax by restaurant bosses on money meant for the pockets of hardworking staff.’’

The consultation paper, which is available for both employers and staff to sign, will be open until November 10th.