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Restaurants use reopenings as chance to scrap service charge

Ed Thaw and Jack Lewes, owners of Leroy

Unless you’re eating at a fast-food outlet, it’s customary to factor in a service charge of around 10% to 12.5% when dining out in the UK. A number of restaurants have used their post-lockdown relaunch as an opportunity to change their business model – and end service charges completely.

Selin Kiazim, former Great British Menu winner and co-founder of Oklava, is removing the 12.5% discretionary charge from bills and incorporating it into menu prices instead. ‘We’ve wanted to do it for years,’ says the chef. ‘Working in hospitality is a valid career: we work long hours and deserve to be paid without asking for an extra 12.5% at a customer’s discretion.

Luca Mathiszig-Lee, owner of Hill & Szrok, says lockdown brought things into sharp focus for him: ‘The furlough scheme has seen staff receiving less than a third of their normal income. Without a service charge to beef up their pay cheques, they’ve been retained on 80% of the national minimum wage.’ Luca says he wants to raise staff pay to protect them from any future lockdowns. ‘As businesses, we’ve been cashing in on a system that’s meant to be a gesture of gratitude. Tips should be a way for customers to say thanks to staff for looking after them, not to pay them for coming to work.’

But Peter Davies, managing director at WMT Troncmaster Services, says even if menu prices go up, it doesn’t necessarily mean staff will take home higher wages. Service charges and tips are delivered through what’s known as a tronc system – they are treated as additional payments, and are subject only to income tax. Peter says: ‘If tronc payments are removed and incorporated into a member of staff’s basic salary, you’ll have to deduct from it such things as VAT, employer’s and employee’s National Insurance, and pension payments.’

Ed Thaw, co-owner of Leroy responds: ‘The optional charge, while more tax-efficient, undermines the idea of service. Yes, prices will go up, but the larger goal is a more sustainable, better-paid industry. A better-paid staff equals happier diners and better experiences. ‘My hope is that more of our friends will have the courage to join us.’ 

Originally published in Waitrose & Partners weekend, pick up a copy in store or read the latest edition online here.