The British Hospitality Association (BHA) has published a Code of Practice which urges restaurants to disclose to customers exactly how they deal with the discretionary service charge and non-cash tips.
The code, drawn up by the BHA after discussion with the Department for Business, says that disclosure should explain how the restaurant distributes the proceeds from the service charge to employees.
It says that disclosure should cover whether an amount is deducted for handling costs (and how much); how the remainder is shared between the restaurant and the employee; and the broad process for distribution. This should explain, for example, whether the amount is shared between the employees in the restaurant through a system controlled by a representative of the employees.
The BHA is urging restaurants throughout the industry to implement the voluntary code.
Bob Cotton, chief executive of the BHA, commented: “We’ve had too little information in the past about the way the service charge is collected, what it is for and who receives it. This has given rise to widespread criticism which has damaged the industry’s reputation.
“The Code will ensure that restaurants make crystal clear how they distribute the proceeds of the charge, who gets it and what percentage, if any, is kept by the restaurant to cover legitimate costs.”
He added that he believed a voluntary code was preferable to regulation but believed that statutory rules would be introduced if the code was not widely undertaken.
Legislation will be implemented in October this year which bans the service charge being used to make up the National Minimum Wage.