Who will carry the cost of new rules on tipping?

22/08/2016

When the government published its review of tips and service charges, the hospitality industry had just eight weeks to grasp its implications and act to have a meaningful influence on the outcome of the consultation process.

In response, WMT took action to clarify the views of the industry and consumers by surveying business owners, employers and employees in the sector, as well diners to find out how they felt tips and service charge should be handled. Here is what we found:

The industry view

The 133 responses we received from the hospitality sector included came from business owners and managers as well as kitchen and waiting staff. Business size ranged from a single site with less than 20 employees, through to large hospitality groups and operators with a staff base of 200+.

95% of businesses stated that they accept some form of gratuity, whether it be a discretionary or non-discretionary service charge, tips on cards or cash tips. Of these business 91% have a tronc system in place.

A third of the businesses surveyed said they give 100% of the tips and service charges received to their employees, with a total of 60% giving at least 90%.

When it came down to how tips were distributed, it was clear that the there is a call for the fair distribution of tips for all involved in the customer experience. 70% called for tips to be shared among all staff and managers – only 1% believed it should go only to an individual server.

One of the significant proposals from the government is to outlaw administration charges. When surveyed on the effect this would have on business costs, over 40% stated it would mean a price increase of more than 20% would need to be applied, with a further 42% saying they anticipated a price increase of 10-20%.

Peter Davies, Head of WMT Troncmaster Services Ltd, commented on the findings:

“The overall census of opinion from the results lean towards a belief that if the government’s proposals are implemented employees could be worse off in an industry where there already lies a skills shortage. More time should be taken to consider the proposals to minimize damage to the industry.”

The consumer’s view

Of those who eat out in restaurants at least once a month, our survey showed that the majority leave a tip of between 5 -10% of the total value of the bill. 63% stated that one of the reasons they leave a tip or pay a service charge is dependent on the overall experience they have received in a restaurant. Despite this, there was a mixed view on who should receive all or a proportion of that tip – whether it should be shared equally among those who have had a part in creating that experience, or just go to the individual who served them.

When asked if they would be prepared to pay more for a meal if tipping or service charges were banned a significant 60% said they would not be willing to pay any extra for their meal.

Key findings

We have summarised our key findings in an infographic to illustrate the key points our survey has raised. Findings have been used to add impetus to the arguments for and against the government’s proposals – now we await its response.

For more information on the implications of the tipping proposals please get in touch with Peter Davies.