Lack of guidance is leaving operators ‘grappling with gratuities’, says panel of experts

Wednesday, 12th July 2017

A clear lack of official guidance on tipping practices is leaving hospitality operators in the dark on how to deal with customer tips, gratuities and service charges, said a panel of experts at a seminar hosted by Manchester business organisation pro-manchester.

The event, organised by pro-manchester’s sector-focussed leisure committee, brought together some of the country’s finest brands, including Head of Marketing for Hawksmoor, Rosie Mira, Sales and Marketing Director for Fazenda, Tomas Maunier, and owner and Executive Chef at Lunya, Peter Kinsella, to discuss what is becoming a hotly contested topic for operators nationwide.

Kevin McKenna, Head of Employment for Manchester commercial law firm Kuits, which specialises in the leisure sector, provided a legal and commercial perspective on the issue. XS Manchester radio presenter Matt White, whose tongue-in-cheek YouTube and podcast series Fodder – where he reads negative TripAdvisor reviews aloud to restaurant owners – is making him a hit in leisure circles, chaired the panel.

The panel explored the issue from both a customer and operator perspective, tackling key factors such as employee motivation, customer communications, and how culture impacts on an operator’s approach to tipping policies.

One audience member encapsulated the issue for consumers, which has resulted in intense media scrutiny for brands such as Harrods and Le Gavroche this year: “As a customer, we don’t know where our money is going when we tip, and this is something the industry urgently needs to address urgently.”

With over 15 years’ experience in restaurants across the UK, Hawksmoor’s Rosie Mira was first to note the visible divide between northern and southern attitudes to service charges: “London is very different to Manchester. London has an average service charge of 12.5%, whereas in Manchester it’s 10% only on tables of six or more – but we make it clear to customers that they are not expected to pay the service charge. It was important for us to research the local market and reflect this in our policy.”

An operator sat in the audience agreed: “Manchester is uncomfortable with large service charges. I believe it’s important for any business moving to the North to speak to hospitality businesses in the city before making key decisions about their approach.”

Although some attending restaurant owners had a clear ‘no service charge’ policy, others were quick to point out the potential impact this can have on staff wages. Fazenda’s Tomas Maunier believes that whilst there is no longer a place for Service Charge in the industry, in an increasingly challenging market where the costs of running a restaurant are escalating; the removal of service charges would need to be offset in some way. This would lead to even more pressure on operators or an rise in the cost of dining out for the customer.

Peter Kinsella of Lunya, a family-owned, independent business, disagreed, believing that a customer should not feel pressured to pay extra at the end of the meal, but instead be able to “sit back and think about what a lovely time they’ve had with us.”

It is clear that each operator also follows their own approach to the distribution of tips and service charges. While some operators allow front-of-house staff to keep their own tips to drive high service levels, Tomas spoke of Fazenda’s belief that “every single person on a team is involved in the end result”, highlighting their practice of sharing gratuities equally amongst back and front-of-house staff.

One thing that all panellists agreed on was the clear lack of guidance from the government, which they feel is making the issue even more challenging for operators. However, guidance may be on the way, as Kuits’ Kevin McKenna explains:

“Earlier in the year, Kuits responded to a Government consultation on tips, gratuities, service and cover charges, which aimed to attract a range of views on actions to address issues associated with tipping practices. The Government’s objective is to ensure workers receive all discretionary payments for service, except those deductions required under tax law. The consultation closed on 27 June 2016 and the Government is currently considering next steps in light of responses to the consultation.”

Until then, the conclusion reached by the panel is that there doesn’t seem to be a one-size-fits-all practice – or, for that matter, solution – across the sector. Each of the brands taking part has their own idea of fair tipping practices and promotes a unique culture amongst its employees. The problem, also, is not unique to one type or size of operator – it can be difficult for smaller operators to handle the practical aspects of dealings with tips and gratuities, while larger operators with multiple sites and brands can find it challenging to instil some consistency of approach across their entire workforce.