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How US-style tipping came to Britain – and sparked outrage from diners and drinkers

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378079422

When L’Escargot, one of London’s oldest French restaurants, reopened after a refurbishment last year it wasn’t just the interiors that were different.

Bosses had quietly bumped up the service charge on customers’ bills, raising it from 13.5pc to 15pc.

Management claimed it was simply a matter of bringing it in line with “most other quality restaurants” in the capital. Yet it caused a surprising furore.

Shortly after the re-opening, a social media user posted a copy of a bill from the restaurant on the online forum Reddit, calling attention to the increased charge. It sparked a heated debate on the direction of the UK’s tipping culture.

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“We’re not yanks. Tips are for good service, and optional,” one Reddit user fumed. Another said: “We should be doing our very best to reject this Americanism. It has to be one of the worst cultural exports that’s come out of there.”

Comments such as this sum up fears that Britain is moving towards a US-style tipping culture, where as much as 20pc is expected as a tip not just in restaurants but in bars, coffee shops, taxis and a host of other businesses – and not leaving a tip is considered a grave insult.

Tips were once relatively rare in Britain: a non-compulsory nicety designed to show appreciation for great service.

However, the rise of service charges on diners’ bills means it has become an expected charge in some parts of the country –especially the capital – sparking outrage from diners who feel they are being unfairly squeezed.

“Those charges are hated,” says Professor Michael Lynn, an American academic who has written dozens of research papers on tipping. “Restaurants that eliminate voluntary tipping and replace it with automatic service charges see their online ratings go down. You’re telling me I have to tip? That’s a voluntary activity.”

Almost half of 2,000 consumers surveyed by the payments company Dojo said they would prefer not to pay a service charge and decide the tip amount themselves. Only a fifth said they preferred service charge.

Service charges are now virtually ubiquitous in London’s restaurants and other venues, and are commonly added to bills automatically. A charge of 12.5pc is the standard, but charges of 15pc to 20pc have been imposed too.

Restaurateurs insist that service charges are always discretionary. But critics argue that, by automatically adding it to the bill, diners are put in an awkward position if they don’t want to pay it.

“There’s a whole lot of research showing that there’s a bias towards the status quo, and that it’s harder to take something off than it is to add it,” says Prof Lynn.

Steve Perez, who owns two hotels in the Peak District, says: “I think most people feel quite uncomfortable. Even if the service wasn’t that great, you don’t necessarily want to get into an argument with the server.”

Perez does not put service charge on the bills at his hotels. Instead, they include a line saying that tips are always appreciated.

Increasingly, practices like these are the exception rather than the rule.

Data on tipping shows why restaurants may favour putting an automatic charge. The average value of tips given to cafés, restaurants, hairdressers and other businesses dropped from £4.65 in 2022 to £2.85 last year as consumers tightened their belts during the cost of living crisis, according to SumUp, which runs contactless payment terminals.

However, Stuart Gillies, the former chief executive of Gordon Ramsay Restaurants, says Government red tape is to blame for the rise of service charges.

“Up until the early noughties, it was cash tipping, and then the Government brought in new regulations,” says Gillies, who now runs restaurants in Chislehurst and Sevenoaks. “They were keen to have a service charge introduced so that they could then track all that revenue, and also tax it.”

The decline of cash is also fuelling the rise, argues Kate Nicholls, chief executive of UKHospitality.

“The increase in service charges is largely driven by a move towards cashless, and an increased use of electronic payment and electronic tipping,” she says. “Venues have been faced with customers paying by credit card and then not having an ability to reward staff.”

Many card readers allow operators to turn on an option to tip, typically suggesting a 12.5pc, 15pc or 20pc addition to the bill.

SumUp has said more and more of its customers are turning on the feature. 2.9pc now have it enabled, according to data supplied to Bloomberg, compared to 2.1pc in September 2021.

One offshoot of the end of cash tips is that digital demands have appeared in venues where they were previously absent, such as pubs. With the average pint of lager costing £4.71, a 20pc tip would add £3.76 to the bill when buying a round for four people.

“Historically, tips have not been part of the pub culture and have been more associated with restaurants,” says Eddie Gershon, a spokesman for pub chain JD Wetherspoon.

Perhaps enabled by the rise of service fees and nudges to tip, other charges are cropping up elsewhere. The Scotsman Group, for instance, has introduced a 2pc charge at its bars and pubs when drinkers order at the bar.

Understandably, this has put some drinkers’ noses out of joint. Many customers are also annoyed because of the opacity of service charge.

“Culturally, the US and UK are very different – it’s much more transparent in the US, because they tip the waiter,” says Sungjin Park, an employment lawyer at Keystone Law. “Here we get charged what is called service charges, but in most instances, customers have no clue how that money gets distributed, if at all.”

In many restaurants, tips and service charges are distributed independently by staff under a “tronc system”. The money is pooled and divided up between all workers, including kitchen staff who would otherwise miss out on tips.

This system guarantees staff a regular top-up to their wages year-round and the cash is exempted from national insurance charges.

Laws will come into force later this year that will make it mandatory for employers to make sure all tips, including service charges, are distributed transparently and fairly to staff. Financial penalties will be levied on employers that violate the rules.

Chef Adebola Adeshina, who runs The Chubby Castor restaurant in Peterborough, says: “Being automatically added on to the bill is a good idea, as it leaves the customer less to ‘worry’ about and ensures a smooth payment time.”

Mark Harris, a restaurant industry consultant, says: “With a service charge going back to them now [staff] can actually earn a very decent wage, which is really important, because it hopefully will bring people into the industry, which we desperately need at the moment.”

There were 107,000 vacancies in the hospitality sector in the three months to April, according to the Office for National Statistics. The industry was behind only healthcare and retail when it comes to the highest number of job openings.

Many bosses hope the incentive of extra earnings through tips and service charge will help make hospitality, a profession long-stereotyped for low pay and bad hours, more attractive to potential workers.

Tips are certainly one of the draws for workers in the US hospitality industry. However, the potential to earn significantly more through tips is reflected in wages.

Minimum wage in the US is just $2.13 for tipped workers, although some states have a higher minimum, compared to $7.25 (£5.75) in other professions.

The statutory minimum in the UK is already more generous, at £11.44 for anyone over 21.

British diners can therefore reasonably ask why they are being asked to top-up wages even more?

Therein lies the industry’s dirty secret: the entire business model is based upon that not-so-optional cost.

“If we remove this 12.5pc [charge], the Brits will give probably 5pc. But then all restaurants would have to make the price of a meal more expensive to be able to pay for [staff],” says Chris Galvin, the co-owner of Galvin Restaurants, a collection of upmarket British and French restaurants.

Attempts by some restaurants to find a solution have gone awry. The owners of Ping Pong, a chain of Chinese restaurants, were recently forced to defend its decision to scrap service charge altogether and replace it with a perplexing “brand fee” of 15pc, which was automatically added to diners’ bills.

The company said it had increased employees’ wages to offset the axing of service charge. It insisted the move would offer “stability of wages throughout the year, reducing the impact of seasonality”.

Tim Thorpe, finance director at Ping Pong’s parent company, said at the time: “Ultimately, we need to raise prices. And some of the feedback that we’ve received has been ‘why don’t you just raise the prices, it seems that you’re doing this a little bit under the counter’.

“But the perception of increasing your prices by 12 to 15pc is pretty horrendous. So that’s part of what we’ve got to try and manage.”

Gillies, the former Gordon Ramsay Restaurants executive, says: “If you stick 12pc on every dish and just say to customers it’s all included, the bulk of the public are really going to react and say no, that’s too expensive, because they judge it immediately at face value.”

Be that as it may, diners and drinkers finding their bills are higher than expected because of service charges hidden in the small print may argue things have already become too expensive.