The business secretary has insisted restaurants should pay tips to waiting staff after a row broke out over high street chains creaming money off their tips.
Sajid Javid’s intervention comes as family favourite restaurant chain Giraffe, which is owned by Tesco, told the Guardian it will no longer skim off a 10% administration fee on tips, a practice unions said was hurting low-wage workers.
Other restaurants such as Cafe Rouge, Prezzo and Strada still charge a 10% administration fee, with Pizza Express, ASK Italian and Zizzi charging 8%. Angus Steakhouse and Byron also say they charge a small fee but did not disclose the amount.
And on Friday, French restaurant chain Côte faced a public backlash after it was claimed that an optional 12.5% service charge goes straight to its head office rather than being distributed among staff in individual restaurants, something the company denied.
Javid, who became business secretary in the last cabinet reshuffle, said: “While it would not be appropriate to comment on this individual case, as far as I’m concerned, tips belong to the staff. I’m getting increasingly concerned about the practice of some restaurants, and will be taking a serious look into the issues raised.”
Supermarket giant Tesco bought Giraffe, a fusion restaurant chain, for £48.6m in 2013. Giraffe’s cash and credit card tips are pooled in a system known as a tronc, where tips are distributed evenly among the staff, with a smaller percentage going to kitchen and other staff.
Giraffe had previously kept 10% of the tips for “administrative and other business costs” but said on Friday it had decided to make the change in its mid-year review. “Giraffe have made the decision to remove their admin charge, allowing all tips to go directly to their staff,” a spokesman said.
Effective immediately, all tips and gratuities, in cash or credit card, will now go to staff. “We believe that our team and customer base will support this decision, and it will be implemented with immediate effect.”
Dave Turnbull, regional officer for the Unite union, which is campaigning to stop restaurants charging fees to administer tips, said: “Waiting staff are among the UK’s worst-paid employees and are reliant on tips to top up their pay.
“Customers eating at popular restaurants like Giraffe or Pizza Express expect their tips to be paid in full to staff, not skimmed for an ‘admin’ fee. This is a welcome step by Tesco, who are living up to their motto, and it shows leadership in the industry. Pizza Express and other restaurant chains should follow suit.”
Pressure is mounting on other high street chains who charge an administration fee when they distribute staff tips, which they say is to cover the costs of items such as credit card fees and payroll processing costs. This week, more than 8,000 people have signed a petition to call on Pizza Express to drop their fee on staff tips.
Some chains have been accused of taking their entire service charge to pay staff wages. On Friday, unnamed workers at Côte told London’s Evening Standard they were told they were paid more than minimum wage, so could not complain that the company took the 12.5% service charge.
A spokesperson for Côte, where profits leapt 27% to £16.3m last year, at first appeared to defend the policy, telling the Standard it allowed the company to pay staff above the “market standard” minimum wage.
But after the Guardian contacted the company directly, its spokesperson issued a denial, insisting that it does return the service charge income to individual branches, where it is distributed equally among staff as part of their regular pay.
“This service charge element of compensation is always paid in addition to a base amount which is at least equal to the national minimum wage,” the spokesperson said. “It is paid through the payroll, net of taxes and NI. As such, the company does not recognise the service charge as revenues in its accounts.”
The controversies were being discussed by customers in branches of Côte on Friday. In Barbican, London, Rachel Haworth, a trainee lawyer, who had just had a celebratory meal with friends, said she paid her tip in cash.
“The tips should go directly to the waiters and waitresses because it’s a direct reward for how attentive and friendly they are,” she said. “I think most people would assume it goes directly to them so to give it to the restaurant is duplicitous.”
Doga and Stuart, who declined to give their surnames, said waiting staff should always get the full tip. The pair had been looking at the menu outside the restaurant, but changed their minds about eating there after discussing the issue. “Let’s go to McDonalds,” Doga said. “At least we know what we are paying for there. I’m disappointed, but I can’t say I’m surprised.”
Other chains like Wagamama, Wahaca, Carluccio’s, Pizza Hut and TGI Friday’s pay 100% of all tips to staff and do not deduct a fee.
Danny Breithaupt, chief executive of the Restaurant Group, which owns Frankie & Benny’s, Chiquito and Garfunkel’s, and dropped its admin fee a few years ago, said his company believed it was unjust to both staff and customers to deduct a fee.
“We feel it would be deeply unfair to our employees,” he said. “They are the ones that earned the money after all and I’m certain our customers would want to know that the full tip amount is being paid to their waiter or waitress.”
