Why is there a need for a new best practice for Tipping?

Very simply, it is about building trust back with both consumer and employees.

The need to re-build trust with both the consumer and with employees is becoming an ever-louder voice across all parts of the service industry. Tipping is one such example as there is a general lack of understanding and clarity over what service charges cover and where they do go.

In October last year, the Prime Minister spoke of her desire to see government legislation on this issue and it is something that could be implemented if industry itself does not come together and create a solution. The Prime Minister spoke of 100% of tips going to workers.

It is never ideal when a government gets involved in such discussions as it always highlights negative stories – when in truth the majority of the industry is doing the right thing. It is right that industry itself creates its own best practice framework rather than it leave it to those from outside. Beyond this, there is a slight ridiculousness. As some of the figures below show, few really understand where a service charge goes and there is a lack of trust in it reaching the right people.

Our argument is that best practice can be agreed with industry and, supported by a kite mark, it will create a positive story and build transparency and trust back into the process.

To place all this in perspective – there have been three surveys carried out, with consumers, with operators and with mystery diners – surveys conducted by WMT, by HGEM, and by EP. The results do paint a clear picture:

  • 77% of mystery diners do not believe that the service charge reaches the person that served them
  • 39% of mystery diners – who should be a knowledgeable audience – did not really understand what a service charge on a bill includes
  • 83% of customers believe that service charge should be shared across teams – FOH and BOH
  • 78% of customers prefer to leave cash tips so that they know their tip goes directly to the staff
  • 96% would welcome a kite mark or accreditation scheme
  • 66% of operators give 90% of service charge to staff
  • 78% of operators would like a set of best practice principles to follow
  • Over 70% would like an independent body to oversee such a process

In conversation recently one Managing Director noted; “The present mood is for greater transparency and quite rightly so. The more that we try to keep everything hidden there the worse it looks. The vast majority of us do go out to do the right thing but there are those that abuse the system and of course this does not reflect well when it is heard about.  The strange challenge is to get industry to be more proactive as it is historically poor at leading such initiatives, but this is the right time.”

Another senior hotelier noted: “I can think of a few examples that have maybe not so much abused the system but have withheld more than they should have for a variety of reasons. I know one of my former hotels kept back 30% until we changed our approach. The customer has to have trust in us if we want them to really have respect for the industry. We have all long complained that we don’t get the respect we deserve but maybe we don’t always help ourselves?”

The campaign for a new kite mark and best practice framework has been led by Peter Davies, WMT, who has passionately argued that this is an important step forward. With EP, we have held two discussion forums with industry operators and Peter also spoke at the conference that EP hosted with Bird & Bird.  Overall, there is a general consensus that such a step forward would be good for industry and the right thing to do for the simple reason that the above stats are not a good reflection and it is very clear that the landscape is confused and needs greater clarity.

So what is being proposed?

In simple terms:

  • Any tips or service charges paid by customers should be managed and processed in a way that is fair and transparent.
  • Any service charge which the customer is invited to pay is always discretionary and should be clearly advertised as such.
  • If customers are invited to pay for service, the business should operate a fair and well-managed tronc system.
  • Customers expect service charges to be paid to staff in addition to salaries or basic pay, not as part of contractual agreements or obligations.
  • The tronc system should seek to reward and benefit all members of staff who contribute to the customer experience and who deliver the service to consumers.
  • Businesses should generally not get involved in cash tipping. Whatever cash staff receive directly from customers belongs to them.
  • Businesses should ensure that staff are aware of their legal obligations to record and declare any cash tips to HMRC.
  • The costs of collecting, processing, administering and distributing tips and service charge to staff (collectively known as administration costs), generally do not exceed 5% of the tips and service charge collected. With the exception of these costs, businesses should make 100% of the funds available to the tronc system to allocate to the members.
  • Customers and staff should be clearly advised of whether a tronc system exists, who manages it (a member of staff or an independent third party), and which groups of staff receive a share.
  • Staff should be made aware of the rules of the tronc scheme, how their own share is calculated (e.g. points, minimum rates, equal share), the identity of the Troncmaster, and how to raise or ask questions regarding the operation of their scheme.
  • The Troncmaster should manage the tronc scheme fairly and free of bias, favouritism, personal friendships or self-interest and should not unfairly exclude certain individuals or groups of staff.

The aim is to create an independent industry body to oversee the kite mark, made up of operators from across the industry spectrum – hoteliers, restauranteurs and leading chef patrons. This is about creating a voice that places industry at the forefront and is about creating a positive story for the sector.