Tipping point

Observations on 12.5%

Those of us irked by the automatic 10-15 per cent discretionary service charge frequently added to our restaurant bills have been even more disgruntled to learn that the "tips" increasingly fail to reach the staff for whom they were intended.

Legally belonging to the restaurant when paid by card, the amount can go towards anything from tips to tableware, or even pay.

At Strada, the chain of Italian restaurants owned by the Tragus Group, a charge of 12.5 per cent is added to bills. The money is not a gratuity, but goes towards paying staff wages. The same happens to service paid by card at Café Rouge and Bella Italia, owned by the same group, although no charge is automatically applied. At Carluccio's, a charge is not added to the bill, but where customers leave a gratuity by card, it may be used to make up some workers' wages to the national minimum wage (NMW). Some of what the customer pays is not therefore a tip.

Frank Bandura, the finance director at Carluccio's, justified this with the suggestion that the NMW was "not designed for the hospitality industry, where it is normal for part of the remuneration to be paid in tips". Historically, waiting and kitchen staff have been poorly paid.

Industry insiders admit there are two issues with the service charge: hidden charges and opacity. First, customers expect a restaurant, similarly to any other business, to cover its costs in the price of the product, here the food and drink. The national minimum wage is a legal requirement and must be met by the restaurant regardless of its service charge revenue. Second, the charge is misleading to customers. In a quick survey of colleagues, most believed that they were leaving a little extra for the staff, the equivalent of a cash tip, and were outraged to find otherwise.

The charge is described as discretionary, but by adding it automatically, establishments rely on the customer being reluctant to ask for it to be removed.

A spokesperson for Le Pain Quotidien - where 100 per cent of any gratuity paid by card or cash goes to the staff over and above their wages - denounced any other arrangement: "We consider it to be poor practice to use the service charge to essentially pay below the NMW, or for other non-staff costs associated with service."

It comes down to opacity. Restaurants told me time and again: "I don't know whether we'll be allowed to tell you." I pointed out that, as a customer, I would be unwilling to pay a fee without knowing where it was going.

And more and more customers are saying the same. Encouraged by discussions and lobbying on blogs and in consumer forums, people report going back to old-fashioned ways, leaving cash tips of their chosen amount rather than being ripped off on their credit cards.

This article first appeared in the 14 April 2008 issue of the New Statesman, Belief is back