CIPP response to call for evidence on tips, gratuities, cover and service charges

11 November 2015

The CIPP has submitted its formal response to the call for evidence on tips, gratuities, cover and service charges. We would like to thank those members who took the time to contribute their views.

Following reports about the abuse of tipping in the hospitality sector where a proportion of tips left for staff is withheld to cover administrative costs, the Department for Business, Innovation & Skills (BIS) launched a call for evidence to consider how the abuse can be dealt. The call for evidence is also looking at how restaurants treat tips left by customers and whether government intervention is necessary to strengthen the Voluntary Code of Practice run by the industry. Evidence is also sought on the impact of these different practices on employers and workers. In particular, they are seeking views on the role for government in ensuring greater transparency and limiting the amount an employer can keep.

The government will assess the evidence collected through this exercise, and propose any further action to ensure fair and transparent practice in relation to tips, gratuities, cover and service charges.

The CIPP issued an electronic survey to its members based on the survey created by BIS. There were 17 responses, all of which came from CIPP members.

Summary of findings

  • 83.3% are aware of the National Minimum Wage (NMW) law in relation to the treatment of tips, gratuities, cover and service charges. One respondent commented that there is an existing arrangement where employers use tips to make up NMW, which contravenes the law.
  • Less than half of respondents (45.5%) are aware of the Voluntary Code of Practice. When asked if the Code of Practice provides a fair and transparent process, 88% agreed and 12% said no with concerns raised about the lack of awareness and that perhaps smaller businesses were not putting the process into practice.
  • When asked if they or their employer sign up to the Code of Practice there was a mixed response. 55% were not sure and there was an even split of 22% saying yes and no. Comments again highlighted the lack of awareness. When asked if they or their employer adhere to the principles in the Code of Practice, 44% said yes and 56% were unsure.

 

  • Answering as customers, 90% said they leave a tip as a direct response to the service received with comments including, “…we have started to check the receipt as sometimes gratuity is added without permission and is sometimes more than we would normally leave” and “Always leave it in cash”. 60% said that in general they are aware of what happens to their tip with 40% never knowing. When asked what could be done to improve this, comments include the suggestions that the tips policy could be put on show, possibly on the menu with a breakdown of where the tip goes.

 

  • 50% of respondents operate a troncs system and the other 50% who gave an answer said that all non-cash tips, gratuities, cover and service charges are passed on to the employee in their entirety.
  • When asked how tips and gratuities that are paid in cash are treated 33% said they were retained by the employee, 17% said they were paid into a tronc system with allocation input from employer and 50% also said paid into a tronc system but without input from employer.
  • When asked as customers if their preference when leaving a tip is in cash or by card, 78% said cash and 22% didn’t mind which method. Comments regarding the cash preference included that the employee would be more likely to receive the tip and wouldn’t have to wait until pay day.
  • 56% of respondents would like to see their tips to go in full to the worker, 11% would like to see the tips go via a tronc with an admin fee deduction and 33% would like to see the tips also go via a tronc but with no input from the employer.

 

Conclusion

What is apparent from the responses to this survey is there is low awareness of the Voluntary Code of Practice for payroll practitioners and low visibility for customers on premises where tips and gratuities are administered. What is also apparent is that there is a lack of trust in businesses to pass on the full entitlement of tips and gratuities to workers.

The CIPP fully supports this call for evidence and would recommend that the Voluntary Code of Practice is given greater publicity in a bid to raise awareness amongst both employers and those businesses dealing with tips and gratuities, perhaps on a statutory footing.

The full response is available to view through the link below.

CIPP response to tips and gratuities call for evidence - November 2015