It is no secret that the UK Hospitality industry is facing a lot of financial pressure lately, from rising wages and NIC rates to staffing shortages and high turnover. This has left operators looking for new ways to save money, cut costs, and keep their head above water.
This has left some customers sceptical of costs when dining out, with some taking their frustration out on tips and service charges. It is a common misconception that businesses are now adding service charges to top up their business funds and help revenue. However, this is not the case: under the Employment (Allocation of Tips) Act, it is illegal for hospitality operators to retain any share of tips and gratuities left for workers- including service charges.
So, what really happens to your service charge? Let’s break it down:
What is a service charge?
A service charge is a percentage of a customer’s bill added on at the end of a meal, usually ranging from 10-15%. These charges can be compulsory or discretionary. Compulsory service charges are flagged before your meal or service, usually written on the menu or a sign near the door. This often applies to larger parties or bookings. Discretionary service charges can be added to the bill after service, and customers can ask for this to be removed.
Where does the service charge go?
Under the new tipping legislation, employers cannot retain any share of tips or gratuities- this includes service charges. That means that 100% of the service charge you leave goes to staff members. This is a common concern among UK consumers, but you can rest assured that legally any amount of service charge or tips you leave is going directly to those who served you.
What happens then?
In the UK, tips must be distributed fairly between staff. Often employers split tips through a Tronc system, which is essentially payroll for tips. This ensures that your service charge, or any tips left, get split fairly between the team behind your meal/drinks. All businesses must also have a written policy on tips that is approved by staff members. This means your team are on board with the way that your service charge is being split, and understand how it’s distributed- if you have any concerns, your host or wait staff will be able to tell you exactly where your tip or service charge is going.
How does Tronc help this?
A Tronc system is the most common and fair method of processing and distributing tips in the UK. For a Tronc system to be compliant, there can be no employer input or bias at play when it comes to tip splitting.
Next time you pay a service charge, you can have the peace of mind of knowing that under UK law it must be paid fairly to the staff behind your service with zero deductions. Restaurants are not trying to bring in sneaky price hikes or extra fees- they are just recognising the good work their team are doing.
