Tips are no substitute for a real wage – it is time for the practice to end

The government says all tips must now go to restaurant and bar staff – but have they missed the chance to ban this demeaning practice altogether?

After a delay of five years, a new employment bill will ensure that hospitality staff get 100 per cent of the tips given using credit cards. Previously, only those paid in cash were the property of the recipient. Post-Covid-19 pandemic, cash is used far less and now 80 per cent of all tips are paid using cards. This gives the restaurant or bar owner control of how that money – which can range from 10 per cent to 15 per cent of the total bill – is distributed.

Over the past six years, there have been numerous examples of restaurants creaming off credit card tips, using them to top up the pay of kitchen staff and managers. The industry has claimed that credit cards incur charges and distributing tips among the staff (the tronc system) incurs admin costs. Many say the practice has now stopped, but there’s no doubt that a huge number of restaurants are still diverting the tips – which customers naively believe will go to the person serving them – and using the money to help cash flow, increase profits and pay lower-level staff.

Tipping is an archaic practice that should have been outlawed decades ago. It embarrasses the donor (customers) and demeans the recipient (staff). When it became a legal requirement for restaurants and bars to hand over 100 per cent of cash tips to staff, “optional” or “discretionary” service charges appeared at the bottom of our bills. With VAT at 20 per cent, eating out has become a luxury many people now think twice about – because the price on the menu is not what you are going to end up paying. And if you are visiting a favourite restaurant, how likely are you to remove the “optional” service charge if you want to be able to get a reservation in the future?

For the past few years, the restaurant business has struggled with rising rents, increased VAT and higher wages. During 2018 and 2019, many high street eateries closed, as the industry was over-saturated and prices soared beyond the pockets of the target customers. Jamie Oliver was a high profile casualty as his family-friendly Italian chain ceased trading. Then Covid hit, and the industry suffered a total lockdown – while takeaways boomed. It still hasn’t recovered. According to the Office for National Statistics (ONS) spending on hospitality in May 2021 remained 70 per cent lower than January 2020, pre-pandemic.

Even though the “Eat Out to Help Out” scheme helped, many restaurants and pubs have still not re-opened. Although restrictions were eased, many restaurants have reduced seating because of customer anxieties about infection, which means lower profits (down 20 per cent to 50 per cent overall, according the the ONS).

On top of everything else, the food and drink sector has huge recruitment problems. It’s estimated that 200,000 EU citizens left the UK during the pandemic, and have not returned. Many worked in hotels, bars and restaurants, and there are currently more than 110,000 vacancies, with 30 to 40 per cent of all businesses looking for staff.

With furlough ending, how many British workers will return to the demanding job of waiting on tables, serving in bars or working in hot kitchens, even if they are going to get more of their tips? The restaurant industry is famous for unsociable hours (60-hour weeks are commonplace) and poor pay. Recently a boss at the popular Wagamama chain said that 30 out of 147 of his outlets were short of chefs.

Working from home saw the public opting for takeaways, and companies like Deliveroo have boomed, doubling the number of drivers. We haven’t returned to restaurants in the numbers that were expected. And tipping has spread to a host of newly popular services where the workforce is expected to work very long hours on poor pay. Why should we have to tip for supermarket deliveries, online deliveries and takeaways? Would it not be fairer to raise the minimum wage to make these jobs more desirable?

There are signs that the catering industry has finally woken up to the fact that they won’t be able to operate for much longer unless they guarantee workers better pay. Now, some – like the Hawksmoor chain – are offering bonuses to staff who recommend friends for a job. Prezzo are offering a 4 per cent pay rise and Boxing Day off so workers get two days off at Christmas. Itsu are paying some staff 11 per cent more – £10.40 an hour – from next month.

These are baby steps and won’t cut much ice with many young people, who seem reluctant to enter a business where they may be reliant on customers’ goodwill to make a decent wage.

In other countries, working in the restaurant business is seen as a craft, here it is considered demeaning by many. In China, many young people have been criticised for opting into a “lying flat” mentality – shunning jobs with long hours and low pay in favour of staying at home or opting for less demanding part-time work and a better lifestyle. “Lying flat” is part of the reason why the UK hospitality industry can’t recruit, and holding their first Apprenticeship Week recently is a belated attempt to change minds and fill jobs.

The Unite union says that five years of delay in ensuring workers get all their tips has cost members in the trade £10,000 each on average. Meanwhile, the new laws won’t increase basic worker pay and offer little protection. Anyone who finds their boss refuses to comply will still have to bring their grievance to an employment tribunal – which will deter many on low pay.

Tips are no substitute for a real wage, real training and security of employment. All of which is conspicuously lacking in an industry renowned for a culture of exploitation.

No wonder, post Covid, so many hospitality staff are opting to “lie flat”.