Discretionary Tips and Service Charges

Martin Couchman OBE Deputy Chief Executive British Hospitality Association

Martin Couchman OBE
Deputy Chief Executive
British Hospitality Association

Following the 'Ten Minute Rule Motion' about service charges, gratuities and cover charges raised by MP Andrew Percy in the House of Commons (9 Sept), the British Hospitality Association would like to highlight the existing Code of Practice on Discretionary Tips & Service Changes.

BHA Deputy Chief Executive, Martin Couchman OBE said: “There is no legal requirement for the restaurant to allocate a particular proportion of the service charge or tip income to employees. However, a deduction for costs incurred in handling these sums would cover credit card and banking charges, payroll processing costs, and the average costs of credit card fraud. The level of costs deducted will vary, depending on the nature of the business. The British Hospitality Association suggest to follow a Code of Practice on Discretionary Tips and Service Charges and any deductions made by the restaurant over and above those for these costs should be disclosed to customers as part of the disclosure process.

“Restaurants should disclose to customers how they deal with discretionary service charge and non-cash tips, at least by a written note available for inspection at each restaurant and on the restaurant’s website, if there is one. This disclosure should cover three key areas - whether an amount is deducted for handling costs (and how much); how the remainder is shared between the restaurant and the employees; and the broad process for distribution, for example, that they are shared between the employees in the restaurant through a system controlled by a representative of the employees.” 

Please read the full Code of Practice HERE.

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