Most of you know that new laws are coming into force which will change the way that tips are required to be distributed. And if you know about it, you probably know that it’s not without controversy. Industry-wide panic is probably an overstatement; after all, we’ve survived both the pandemic and Brexit. We are resilient. It’s more a collective rolling of the eyes, a feeling of frustration about a piece of legislation which is aimed at helping our industry but may end up causing hardships for both companies and employees at a time when we can least afford it, and which feels out of touch with how most businesses truly operate.

When we asked a range of industry leaders to comment on our thorough breakdown of the legislation and its implications, we were interested by the highly measured response we received. Yes, there was a clear-eyed criticism of the bill’s problems and anomalies, and their potential impact, but there was also impressive and stoical optimism: It’s going ahead, and we’re going to make it work.

We hope that passing on these insights will empower you to move forward with the same cautious positivity but also to be aware of the drawbacks of the new legislation so that you are able to act proactively, putting in place measures to protect yourselves from potential difficulties.

AN ARGUMENT FOR KEEPING CALM

PARIS BARGHCHI, QUINCE BAKERY & NOBLE

We need to be aware that this is a conversation about money and money is something that is very personal to everyone. We are all entitled to our opinions and feelings around money – it promotes reactions that are both emotional and physical. That means it’s extremely difficult to have a discussion which feels clear-sighted and rational. In my own work, I’m going to try to compartmentalise the discussion by splitting it into the philosophical reactions of our industry and workers, and the practical effects that it has. I’m asking: how does this empower us as individuals, as businesses, as an industry and as a community? That will enable me to act and to talk to others in a measured and helpful way.

Whilst there will be many challenges, the intention of this bill is to bring structure to something that is, as of yet, unstructured and therefore not properly monitored. There will be challenges, but what would you prefer – truths that come with problem solving or continuing with confusion and possible deceit?

The structure of the hospitality industry as it stands in the UK, and particularly in London, is not a realistic visual. Will this bill force restaurants to work within their means? Will the standardisation of a single financial area support a new way of creating identity and structure within the hospitality and leisure industry? This is the first step. Use it to help you build structure, honesty and transparency around your business, principles and ethics. The expression “if you want an easy life don’t work in a restaurant” springs to mind – not because it’s hard and cruel, but because it’s about people, and people need real, honest connections. It’s about taking care of those people from any and all walks of life. It’s an industry built on generosity, and the moment we take advantage of our employees, our customers or each other, the heart of our industry develops sickness.

Some businesses have been running fair and fantastic internal Tronc and tipping systems but unfortunately, in the eyes of many, the hospitality sector has struggled to build a synchronised policy (of course because the sector covers such a diverse pool of businesses). The lack of a standardised system has resulted in a muddy vision of what the best practice should be. In my opinion change is better than stagnation as change usually leads to further evolution and development. A policy that can bring the hospitality community to be more aligned could help with giving us a louder voice in certain areas, leading to further national support.

I am not saying that I agree with everything this bill states and stands for but what I am doing is chasing for it not to collapse my world or career – I have a choice and I choose to be positive and fight for the industry I love.

JAY PATEL, LEGARE

As an industry the bill is intended to bring clarity and fair pay, and that is a great thing. Pay is a very divisive subject, for obvious reasons. It’s very personal and it’s one of the primary reasons employers and employees fall out. More transparency is a good thing as it would eliminate a lot of the disputes we have. It would also provide more clarity to customers – they’re not sure how service charge works and frequently ask ‘do you get all of the service charge’? It would empower staff to confidently answer ‘yes’ as they would have the clarity and understanding. That increase of trust between employees and employers, and between operators and the public, is a good thing.

If structured properly, the new legislation could help bring an end to inflated hourly rates and wages. This is an area (especially post pandemic) which needs addressing as payroll seems to be an issue for most restaurants in London. It would also protect employees in the case of furlough (as we saw service charge wasn’t included in furlough payments and people were paid horribly during the pandemic), as well as secure mortgages and loans from banks (for the same reason – service charge is not acknowledged as part of salary).

Finally, we might see that employees are empowered to work harder and make more money for the business as it would be reflected directly in their payslips. If you sell more, and make more service charge, you’ll be paid more!

THE NOTES OF CAUTION

JOSH BLINSTON-JONES, PASKIN GROUP

The Employment (Allocation of Tips) Bill came from good intentions and has the potential to be effective regulation of an opaque element of our shared industry. However, in its current and impractical form it creates unnecessary costs and additional administration burdens for employers and risks financial instability for their employees. 

From my perspective, the two critical issues are firstly,

• that the proposed inclusion of agency staff to receive service charge conflicts with the current way in which agencies pay their staff and does not work in its current format – in neither theory nor practice – and needs urgently addressing or removing from this bill. 

Secondly,

• the inability to pool or retain service charge for more than a calendar month risks irregular pay for employees during fallow periods where a reserve could be dipped into. Post-COVID, stability is crucial for prospective employees and the industry would inevitably become less attractive. Even extending this rolling period to 3-months would be a much more practical approach.

The fundamentals of the bill are sound – a fair distribution of service charge – and will be welcomed by customers and employees alike. However, several practicalities of the current proposal need consideration and an industry voice at the table. It’s not enough to have MPs joke to each other across the floor about how well they tip their constituents, this needs serious debate and examination.

JAY PATEL, LEGARE

JAMES MURRAY, TOKLAS

There are a number of issues which need ironing out before the bill is passed, and which will cause significant negative impact to the businesses which are already operating fairly (which is presumably not the government’s intention). The main issue I have is that hospitality as an industry is extremely vast and covers many types of businesses, not just restaurants, which we tend to focus on. Some businesses have sites which are service charge generating and others which are non service charge generating (for example a restaurant with a retail arm). A lot of these businesses will pool this service charge together and then distribute a percentage of it to the generating sites staff (usually 70%) whilst using the remaining 30% to pay non generating sites’ staff service charge too. 

This pooling creates an equal paying system for all employees that work for the company. It also provides service charge to the company drivers that deliver produce to each site, or the operations managers who are in charge of maintaining service standards at each site – but aren’t directly involved in day to day ‘service’. With the new bill, if structured incorrectly, staff at certain sites will have grossly overpaid salaries whilst others in the company are horribly underpaid. In short, if this bill isn’t structured correctly, it would be disastrous.

The majority of scrupulous restaurateurs will welcome legislation that brings into line those operators who often cast a bad light on the industry as a whole. That said, this bill has far more pitfalls and nuance to make it as simple as that. 

For seasonal businesses, the paying out by the end of the following month will be a major stumbling block to maintaining cashflow. The potential fluctuations in pay will do nothing to further hospitality as a viable career path for those considering the sector, especially for those looking to secure a mortgage. This all (and more) begs the question as to whether a service charge or tronc model is still viable if we want to be taken seriously as an industry, both by staff and customers (which is a bigger question around Britain’s relationship with both food and service). Although service included has had mixed results for those adopting it (both here and in America), perhaps it’s the way forward.

HUSSEIN AHMAD, VIEWPOINT ACCOUNTANTS

This might lead to the end of service charge/tips altogether, which some may view as a good thing! But in the meantime the new legislation will certainly cause greater administrative burden for companies. This is not the only way that it will punish businesses who are already operating fairly – many would say that holding tronc reserves to pay stable wages in slower trading periods is fair, but this bill does not agree. This means that take-home pay will fluctuate seasonally, with all the difficulties that causes both employees (in terms of financial planning, attaining mortgages etc) and employers (challenges finding and keeping staff during quiet periods).

What I think is really important to highlight is that although the legislation is likely, the detail has not been decided and is subject to change.

You can read our overview of the new legislation here, including a full breakdown of the pros, the cons, the potential impact of each detail and the anomalies which we hope would be ironed out before the bill is passed.

If you would like to raise your concerns or support of any part of the bill, send us an email at service@countertalk.co.uk.