The hospitality industry is under government scrutiny, with a raft of new proposals currently under consideration, including plans to ban restaurant owners from taking a cut from ‘discretionary service charges.’
Several well-known restaurant groups have made headlines over questionable practices which included charging an administration fee for handling service charges, meaning that customer tips were not being fully passed on to staff.
There is also widespread confusion amongst customers, regarding whether a ‘discretionary’ service charge is in fact optional. This can lead to customers double-tipping, by paying the discretionary service charge listed on the bill and then adding a gratuity on top.
A government consultation, which is due to be completed at the end of June, will look at a range of possible options to meet its objectives for fair, transparent and discretionary payments for service.
One of the possible options being considered to ensure workers receive a fair share from discretionary payments for service includes either a total ban on any deductions, other than tax, or a cap on the deductions an employer is able to make.
The government is also planning to look carefully at tronc schemes, which are widely used in the hospitality sector.
Lara Murray, an employment law expert with Palmers explained: “A tronc, which is taken from the French ‘tronc des pauvres’ meaning ‘poor box’, is a separate, organised pay arrangement often used to distribute tips, gratuities and service charges and is run by a ‘troncmaster’ who is responsible for running a payroll and reporting the information to HM Revenue and Customs.
“New proposals could include placing tronc requirements on a statutory footing and giving additional protection to workers acting as troncmasters. The proposals do not yet go into detail, regarding how this additional protection will work, given that troncmasters do not operate under the control of their employer.
“Another proposal is that the government’s existing voluntary code of practice – which provides businesses with guidance and best practice principles on tipping – is made a statutory requirement.
“This would not impose legal obligations on businesses but would mean that non-compliance with the principles of the code could be taken into account by a court or tribunal in any resulting employment disputes.
“The outcome of the government’s consultation could have far reaching effects on the hospitality industry and any business owners operating in this sector will need to ensure that they are up to speed with any changes which are introduced.”
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