Thanks to an absurd new ruling, any tip or service charge you pay will now almost certainly enrich the restaurateur. It is best to tip in cash and in secretby Alex Renton / January 14, 2007 / Leave a comment
The tipping point
Tipping in restaurants originated, possibly, in the 18th-century coffee houses of London, on whose tables stood jars marked “To Insure Promptitude.” In modern Britain, tipping and service charging are principally used to boost a restaurant’s untaxed income, enabling proprietors to cover hidden costs and wriggle round laws on the minimum wage. This infuriating and unjust practice has now been enshrined by an inexplicable ruling from the tax authorities in the restaurant-owners’ favour. It reverses a policy set in 2004, when, to the delight of tippers and poorly paid waiters, the inland revenue ruled that tips should not count towards the minimum wage—and if employers diverted money from tip-pools or service charges to waiters’ salaries, they should pay national insurance contributions on the sums involved.
That seemed very reasonable, and it should have ended the much-resented practice whereby restaurants lean on customers to double-tip, by adding automatic “optional” service charges to bills (the “optional” was itself a tax-dodging mechanism). It did end the entirely unfair practice of employers snooping on the division of the tronc—the traditional pool of tip money—among their staff and using the cash to raise salaries without paying NI contributions.
But HM revenue and customs, lobbied hard by the restaurant industry, reversed the decision in late October. Its only new stipulation is that management can’t interfere in the allocation of the tronc (though it may “advise” on it). But the money that low-paid staff get from it can be used to push their salaries over the minimum wage threshold and NI contributions won’t be due—which of course hurts the employee’s future pension. A new look at the law has been half-promised by the treasury—but the trade will vociferously oppose any further change while they labour under a full VAT rate (unlike restaurant-owners in most other European countries).
Tippers—and scrooges—should bear a few things in mind. British restaurants are enjoying an unprecedented boom, not least because of the flow of young, cheap labour from elsewhere in the EU. If a tronc system is in operation, any tip you give will almost certainly be in part a further gift to the restaurateur. Cash tips have fallen off drastically now that most people pay with plastic. And waiters’ wages are pathetic—jobs for experienced staff in London restaurants command £13-15,000 a year. The minimum wage is £5.35 an hour; for those under 22 it is only £4.45.…