How Do Service Charges Actually Work in London Restaurants?

Service charges. You can’t talk about them without unleashing a whispery mania. I should know: I’ve been trying to write this piece for two weeks, and no restaurant owners want to talk to me. Some are “away.” Some “don’t think they’re right for this.” Others have ignored me entirely.

One PR wrote to me to say:

“Many thanks for the below.

There has been so much negative coverage in major press that most of our clients don't want to be involved in a story on service — in case it leads to more.”

Of course, anonymous PR is referring to Gavroche-gate, during which Michel Roux Jr revealed he treated the 13 per cent service charge as revenue. At the time, Roux said: “It is not clear for the customer whether or not they should leave extra on the table or whether or not it is going to all the staff or how it is being distributed.”

So, what I was hoping to do was find out exactly how service charges should work, and how they work in London restaurants in practice. Where does the money go when we add tips on our cards, or leave cash, or pay optional service charges? Those 12.5 per cent discretionaries seem sizeable enough that we shouldn’t need to leave more, but what if the person we think we’re accrediting for the service doesn’t get a thing?

Last year, a pluckier journalist than me managed to publish this piece on tip distribution in chain restaurants, and it led to a government report, which called for service charges on customers’ bills to be clear and voluntary.

There are no laws about splitting tips and service charges, but the British Hospitality Association (BHA) has a code of practice. It states that cash tips belong to the person they’re given to, and should only be pooled if that’s what the individual members of staff want; their bosses shouldn’t be involved. It also says that discretionary service charges and non-cash tips are usually paid to employees with tax deducted, just like wages.

In reality, restaurants pick and choose how they do it, and everyone does it differently. I spoke to — let’s call him Dave — about the one and a half years he spent working for a small London-based chain of restaurants. Dave told me that while he was a member of staff, every single tip (cash or otherwise) was collected and given to the manager at the end of the month as a bonus. The company used it as an incentive to make staff stick around. When Dave was eventually promoted to manager, that monthly bonus never came to more than £60, and was often more like £45. His annual salary — for 35 hours a week — was less than £11,000.

My favourite part of that email from anonymous PR said:

“Despite all of them running fair systems — [sic] I'm sure your piece will help to dispel much of what has been said. I'll speak to a few again, but I think it might be tricky!

Sorry I can't be of more help,”

Totally! I’ll do my best! Just like I can speak fluent Mandarin just as long as you don’t try speaking to me in Mandarin. If people don’t talk, I cannot dispel a thing.

The BHA is all about disclosure. It says: “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.” It says this disclosure should cover how much the employer takes for handling costs (if any), and their broad process for distribution.

Of the new process at Le Gavroche, Michel Roux Jr says: “There is too much ambiguity between service charges and tips, so from the end of March 2017 we went ‘service included’.” He says it’s clearly marked on menus and bills so that customers know “no further payment or gratuity is needed,” and there’s no option for adding a tip to a card payment. If customers want to leave more, they can do so in cash.

Every restaurant’s process is different and the only way to get a grip on it is to ask the wait staff where the money’s going before you hand it over. Keep your wits about you. Look out for your people because their employers often don’t.