‘Expect to see 15pc on your bill as standard – US-style tipping is here'

Telegraph

15-05-2025

A double whammy of Government policies have brought a struggling hospitality industry to its knees, and consumers will pay the price in the form of American-style tipping.
US-style tipping culture has crept into establishments where tips were never historically paid, such as cafes and pubs, while restaurants now routinely ask for tips of 20pc on top of a cover charge.
The recent crackdown on employers pocketing staff tips and higher rates of employers' National Insurance payments come against the backdrop of rising costs, the exodus of workers after Brexit and fewer customers with disposable income for going out.
Staff are paying the price. Contracted hours are being trimmed, workers get sent home without pay if they aren't busy and small perks such as the after-work beer have been retracted.
'My job now and the one I took a year ago are very different,' says Maya*, a commis chef who works in an historic London restaurant. 'The way my colleagues and I describe it is that we're frogs in boiling water.'
Policies designed to help hospitality staff have backfired. The Employment (Allocation of Tips) Act – commonly known as the 'Tips Bill' – came into force in October. It mandates that businesses must pass on 100pc of tips and service charge to staff, prohibiting employers from retaining any portion of these gratuities.
Although it aims to ensure fairness and transparency, the effects have been negative.
'Before the legislation, the service charge was pooled and often used as an emergency buffer for restaurants,' explains Kitty Slydell-Cooper, of Countertalk, a hospitality community.
'But from October, the buffer disappeared and restaurants put many more of their staff down to minimum wage, and topped up the wages of a greater number of people with the service charge – which is being spread more thinly.'
Ryan's* team in a luxury bar in Mayfair dropped from 13 people to just four in a matter of months. Those who were kept on get fewer hours and have to make do with less.
'One of my bartenders got paid £1,600 in January,' he said. 'I just don't know how some are surviving.'
The 3.5 million people employed in the UK's hospitality sector are in crisis – and they make up about 10pc of the UK's entire workforce.
Money is their biggest concern, according to a study by Wagestream, a financial platform. Almost a quarter have nothing in savings.
'We've been tracking this for eight years, and this year's results feel much more emotive. Workers had the pandemic and the cost of living crisis, which everyone assumed was a blip,' says Peter Briffett, head of Wagestream.
'But with the National Insurance increases, 2025 is only going to get worse.'
Stealth charges
Despite the fact that the sector is being pummelled from all sides, it is growing at 5.9pc – almost double the rate of the UK economy, according to UK Hospitality. Restaurants, pubs and clubs are the driving force.
But the Government is not helping. 'The exact opposite has happened with their policies, which is that people are forced out of work, or forced to move jobs,' says Briffet. The Chancellor's increase to employers' National Insurance will hit hospitality hard. 'They're high volume businesses with low margins, yet now have to pay millions of pounds extra in tax. They need that money to operate their businesses,' he adds.
Employers' contributions rose from 13.8pc to 15pc, and the weekly earnings at which employers start paying National Insurance was lowered from £175 to £96.
This is being passed on to customers. Stealthy cover charges have been added to bookings, and there's also been widespread adoption of a 15pc service charge – up from 12.5pc. At The Wolseley, for example, the 'standard discretionary service charge' is 15pc, on top of a £2.50 cover charge.
Experts suggest in some restaurants this could creep up to the American-style 20pc soon. This has particularly been the case in high-end establishments, where international clientele are more used to paying higher tips. It's also more tax-efficient to raise service charge to pay staff, rather than raising menu prices.
'Expect to see 15pc on your bill as standard, and don't be horrified when the card machine is asking you to add an additional gratuity,' says Slydell-Cooper. 'It will be propping up a totally beleaguered industry, so it's best to view it as a tax loophole that allows for the restaurants you love to survive.'
Although it is technically optional, many diners feel obliged to pay service charge.
A survey by the Hospitality Professionals Association found 53pc felt anxious about requesting to remove it. But imposing a US-style 20pc tip may be a step too far for British people. Payment provider Dojo found that only 3pc of people would tip that high in the UK.
'Eating out, of course, is already very expensive, and there's a sense that diners want to tip their server, but not be paying their wages,' adds Maya. 'My restaurant is falling into the US system.'
'Unfortunately, we love what we do'
For workers in the industry, the relentless instability and financial struggles of working are taking a toll.
The charity Hospitality Action provided financial and emotional support to more hospitality households facing hardship than ever before. Its 2024 Impact Report found that the number of hospitality workers reporting mental health struggles at some point in their careers reached 76pc – an increase of 12pc since 2020.
Maya's base rate of pay is now under the London Living Wage of £12.21, and when her hours are cut, she gets less of the already-stretched service charge.
Living on this is only feasible because the 25-year-old lives at home with her parents. And working six days out of seven, at unsociable hours, she rarely has time to spend her earnings.
'There's a passion associated with cheffing and cooking which means they can get away with pay being as low as it is,' says Maya. 'Unfortunately, we still love what we do, and feel lucky to have that kind of work.'
Paul*, a 32-year-old manager at a high street chain restaurant in St Albans, has been the sharp end of the changes.
There have been several rounds of redundancies, and he's being pushed to increase sales and profitability with a skeleton team.
'It's a 100-cover restaurant, and often just me and another person on the floor,' says Paul. Contracted to work 46 hours a week, Paul is often pushed to do overtime that amounts to 60 hours a week – all of which is unpaid.
He is also constantly having to cut the hours of his staff. 'Cutting someone from a Friday night isn't just a reduction in hourly wage, they could lose the £100 they might get through tips,' he says. 'Many have second jobs, because that's the only way to survive.'
The longest-tenured member of staff has been at the restaurant just nine weeks, which makes a busy service even more stressful. However, he notes that 'unless you want a restaurant staffed by school kids,' it's becoming impossible to get good staff to stay in the industry.
According to the CIPD, the hospitality industry has the highest employee turnover rate among all sectors, with an average turnover rate of 52pc.
'It just isn't worth it any more'
Experts believe far more must be done to support this vibrant industry and the millions of workers employed in it. Slydell-Cooper says: 'A lower VAT for hospitality businesses, like in Holland where it's 9pc, would make an enormous difference.
'In the UK, it was dropped during the pandemic, but went back up to 20pc – it feels brutal.'
Ryan, Paul and Maya all have an eye on the door. Ryan plans to be out of hospitality completely by the autumn, in the hopes of finding a 'normal 30-year career' – even if he has to go back to university to study for it. Paul is in the final stages for an operations manager role at a takeaway chain. He believes the dine-in market, as a whole, is doomed.
'Lots of managers working for my current employer have left already, and switched to retail, because it seems like a holiday compared to what we're going through,' says Paul.
'The amount of stress we're under, and what we're being asked to do just isn't worth it any more, and I have to go before it has adverse effects on me personally.'
Maya, who attended culinary school, still wants to work in food, but more on the education side. She's looking forward to being on the same time schedule as her friends, although will miss the company and camaraderie of her colleagues.
'If everyone in the kitchen left, the whole place would crumble. Yet management is not making any allowances for that,' she says.
'I am proud to be part of the restaurant, but I feel like we're being taken for mugs.'