London-based dim sum chain Ping Pong has scrapped service charge and is replacing it with a discretionary 15% ‘brand charge’ to fund wage rises for all of its restaurant teams.

The group, which operates five sites across the capital, says the move means its teams will benefit from increased company wages that ‘match earnings they would have received with service charge distribution’.

As a result of the new wage levels, which came into effect from the beginning of this month (1 April), the starting rate for an employee with no previous hospitality experience will be £12.44 per hour – £1 more than the recently increased National Living Wage, but lower than the voluntary London Living Wage, which currently stands at £13.15.

It is understood that pay rates are subject to increases based on experience, with the lowest wage on Ping Pong’s payroll as of 1 April being £12.64 per hour.

The group says the decision to ditch a tronc-based service charge was brought on by new tipping legislation that’s set to come into force in July, which will require hospitality business to pay staff all money left to them in tips.

In a statement provided to MCA’s sister title Restaurant, the group said: “Ping Pong is very proud of the reputation it has as a good employer and despite the many recent headwinds has acted with integrity and honour, with a high priority placed on employee retention.

“With the forthcoming code of practice on fair and transparent distribution of tips, the company has decided to act ahead of the legislation and make a move that allows our employees to maintain strong, sector competitive earnings whilst continuing to offer good value to our customers.

“Previously, like many restaurant groups, our service charge takings were managed and distributed through an independent tronc scheme, with our hourly paid employees paid basic house pay plus a tronc (service charge) distribution.

“We have now taken the decision to remove service charge from our operations completely. From 1 April, our teams benefit from increased company wages that match earnings they would have received with service charge distribution.

“The benefit to our employees will be stability of wages throughout the year, reducing the impact of seasonality and the higher wages will also mean improved access to financial products such as loans and mortgages.

“With a fairer wage structure in place, our customers should not pay any extra service charge or tips.

“To achieve this change, we need to increase revenue by 15%.

“In this initial trial phase this increase was introduced through a discretionary brand charge. Instead of implementing price increases as part of our core menu, we wanted to give our customers some flexibility by creating a new discretionary charge.

“The brand charge covers additional costs related to operating a franchised brand and imposed by the Ping Pong brandholder, including franchise fees and other brand-related expenditure, but being discretionary, our customers do have the option of removing or reducing the amount.”

The business adds that it is keen to consult with customers in the coming months before making a final decision on either making the ‘brand charge’ mandatory, introducing price rises, or a combination of the two.

“As we seem to be one of the first in the sector to proactively address the upcoming legislative changes, we are committed to finding the best approach in consultation with our customers,” the statement continues.

“So, we will be reviewing all constructive feedback before making a final decision for our June menu. The brand charge will then either become mandatory or we will increase individual product prices (or a combination of both and or other).”


This story originally appeared in MCA’s sister title Restaurant.