Following PizzaExpress, Cote is the latest sector operator to come under the spotlight of the wider media and taken to task on how it distributes service charge. With staff recruitment and retention at its most challenging and when consumers are demanding more transparency, is it time for sector wide legislation to be implemented to take out the grey?
It got some column inches last May, but compared to the national media coverage surrounding tipping over the last month, an MP’s proposal for a change in the law to stop employers reaping the benefits of staff tips in the leisure, hospitality and service sectors, mostly went unnoticed.
Under the proposed Service Charges, Gratuities and Cover Charges (Hospitality, Leisure and Service Sectors) Bill from Conservative MP Andrew Percy a Statutory Code would be introduced into the industry.
Percy said at the time it would “set out clear measures on the distribution of tips and service charges”. He proposed something similar to the tronc model that exists for national insurance liabilities.
“Employees themselves will determine how tips and service charges are distributed in the business: if kitchen and bar staff are to get a share, that will be decided by the employees,” Percy said.
The Bill aimed to cap the percentage cut that an employer can take from tips as an ‘administration fee’.
“Personally, I believe that there should be no percentage taken by the employer, but there is a view among some that they incur a cost in collection. Therefore, I would seek consultation on that matter.”
Finally, each business would be required to display its policy on tips and service charges so the consumer is aware of exactly where the money goes and how it will be distributed.
The Bill made no further progress than being put forward, despite Percy securing cross-party support for the proposal.
Over the past few weeks, there have been plenty of examples put forward of brands that distribute 100% of tips to employees, equally there have been a similar amount which have been flagged up as subtracting admin fees, with some taking as much as 10% of all tips.
Is it illegal, no. Is it immoral? That is a grey area that needs careful negotiation. For every operator that has been in touch this afternoon to highlight how it gives all service charge to staff, there are those looking at the media coverage Cote is currently getting and thinking “there but for the grace of god go I”.
One thing is clear. Following on from the tax furore surrounding Starbucks, all businesses, big or small, are now fair game for journalists and the wider public to “look under the bonnet” to see if their business practices hold up. Let’s be clear, you are going to get every investigative journalist, national and local, going into every high-street chain looking for the same thing. Also no matter how well you treat your staff, a disgruntled ex-employee now knows where to go with their story, true or not.
What is clear is that the current position relating to tips, gratuities, service charges and cover charges is not transparent for consumers, and many would argue it is unfair to employees. Would a blanket piece of legislation penalise those operators already passing on all the service charge to staff? You would hope the strength of their staff recruitment and cultures would win through, or is that too much of a romanticised vision?
Ultimately it is in the best interests of employers to offer an attractive package to their staff. If admin fees on tips prove to be a barrier to recruiting the best staff then they will inevitably disappear. But, in a sector that is constantly striving to improve its offer to staff, a fair and transparent tips policy will go way beyond salaries.
While the recent publicity is unwelcome for some operators, it does have the effect of highlighting the issue to a new generation seeking employment in the sector. There could be little excuse for claiming ignorance about this charge for anyone looking to join the sector this month.
