Wot, no service charge?

[malcolmwilliamson]

The recent Independent newspaper's revelations and campaign on tips coincidentally came between two lunches, at Storm in Poole and Lucknam Park in Wilts, where a service charge was neither mentioned nor invited on the menu or the CC device.

As a result, and in recognition of very competent service in both restaurants, I tipped more than the standard amount and felt good about it. A sort of win-win situation.

Are these experiences unique to me?

[chrisp]

The Fox in Shoreditch doesn't add a service charge on, at least not in the bar area. But that's fairly unique in my experience.

[rjs1]

The recent  Independent newspaper's revelations and campaign on tips coincidentally came between two lunches, at Storm in Poole and Lucknam Park in Wilts, where a service charge was neither mentioned nor invited on the menu or the CC device.

As a result, and in recognition of very competent service in both restaurants, I tipped more than the standard amount and felt good about it. A sort of win-win situation.

Are these experiences unique to me?

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My tax and NIC knowledge is a bit rusty, but I think that the position is roughly as follows:

Many operators feel that the service charge, whether added automatically or left to the customer's discretion, is wrong in principle. In an ideal world the prices on the menu should be the prices you pay, except for a (cash if possible) "pourboire" for good service.

However, the National Insurance treatment of service charge means that very few restaurants can afford to take this principled stand.

If the service charge is stated to be "optional" and is properly administered by a troncmaster who is not a director of the restaurant business, there can a number of advantages. It is then regarded as a separate employment, does not suffer NIC in the hands of the staff member, there is no employers' NIC to pay on it, and merely suffers deduction of basic rate tax.

Cash tips can be paid gross to staff, who are then responsible for declaring them on their own tax returns (which probably happens about as often as the Vatican admits that they were wrong about contraception).

I think that there would be a VAT advantage as well, but admit that I've never really got my head round that one - can anyone help?

As a result, only seriously subsidised places like Lucknam Park and perhaps family run businesses where most of the staff are family members and there is little "employment" as such can afford to do the right thing.

What surprises me is that there isn't more pressure for a standard 10% service charge rather than 12.5%, which always seems excessive to me.

[Harters]

For some years after it opened in the 1970s, the Moss Nook (near Manchester Airport) actively discouraged and declined tips saying that the staff were "well paid".

Times have changed and there's now no discouragement to tipping. Unfortunately, it's about the only thing that has changed. Menu would be quite familiar to 1980s diners "We only serve duck well done, as that's how our customers like it".

John

Edited July 29, 2008 by Harters (log)

[malcolmwilliamson]

According to today's Independent http://www.independent.co.uk/news/uk/this-...ays-881385.html the government are to introduce legislation next year, after consultation, to

a) ban restaurant owners from using tips and service charges to bring staff wages up to the legal minimum and

b) demand transparency on how customer tips are distributed.

[PhilD]

According to today's Independent http://www.independent.co.uk/news/uk/this-...ays-881385.html the government are to introduce legislation next year, after consultation, to

a) ban restaurant owners from using tips and service charges to bring staff wages up to the legal minimum and

b) demand transparency on how customer tips are distributed.

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Whilst I do support the Indy's campaign, I wonder if they missed one of the hidden benefits of the system that rjs1 pointed out i.e. the proportion of "pay" that was derived from tips/service charges was free of both employer NI @ 12.8% and employee NI at @ 11%.

Obviously this change means this money will need to be found from somewhere. My guess is that we (the diners) will pay more - assuming the economy/market will allow it. But more importantly I wonder whether the staff will actually see less in their take home pay as a result.

[jackal10]

http://news.bbc.co.uk/1/hi/business/7533863.stm

[BertieWooster]

On the Today programme discussion, the Unions were clearly suggesting the change could leave staff worse off because of the imposition of NI contributions.

[Infrasonic]

<conspiracy mode on> So the tax and NI may go up...Hmmm it wouldn't be in the Govts. interest for that to happen now would it... <conspiracy mode off>

[rjs1]

<conspiracy mode on> So the tax and NI may go up...Hmmm it wouldn't be in the Govts. interest for that to happen now would it... <conspiracy mode off>

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As a former tax inspector, I can assure you categorically that such an unworthy thought would never cross the mind of anyone in government...