Restaurants could be forced to take discretionary service charges off the menu if a Government proposal to introduce an 'opt in' tipping system is served up following a public consultation this summer.

Last year, MoneySavingExpert was one of 183 respondents to the Department for Business, Innovation and Skills' investigation into concerns surrounding the transparency of the payment of tips, gratuities, cover and service charges.

The investigation has now closed and a consultation on how to address problems with service charges will remain open to the public until Monday 27 June.

Issues include employers keeping all service charges, instead of passing them onto waiting staff, and employers charging an administration fee to workers for handling service charges.

In our submission to the Government inquiry, we stated we would like to see "increased transparency on what happens to any tips paid by consumers for the services they have received from a trader".

We also highlighted the results of an MSE poll from August 2015, which showed the majority of the 19,024 people who took part thought tips should either go directly to the waiter or waitress, or be split between all restaurant staff.

Martin Lewis
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What was the Government investigation all about?

It was looking for evidence in relation to practices such as employers keeping all service charges, employers charging an administration fee to their workers for handling such charges and employers charging waiting staff a fee based on their sales during a shift.

The Government also requested evidence about the current levels of transparency given to consumers and workers.

Who else responded to the Government investigation and what did they say?

Although the call for evidence first focused on the hospitality sector, it attracted responses from a range of others where people tip, including gambling, hairdressing and taxi services.

What did people want from the investigation?

The overriding response from workers and customers was that all discretionary payments for service should go to the worker or be shared between a group of workers without the employer getting involved.

Meanwhile, there was broad agreement from worker, employer and consumer groups that there needs to be more transparency around the treatment of service charges.

Options to improve tipping practices laid out on the table – have your say
Restaurants could be told to remove service charges from customers' bills

What are the options on the table in the consultation?

The Government believes that all discretionary payments for service should be subject to three broad objectives:

  • Be clear to customers that they are voluntary
  • Received by workers
  • Clear and transparent to customers and workers in terms of how payments are treated

To achieve this a range of options have been laid out in the consultation.

One option involves making it clear to the customer that they have the option to pay a suggested service charge (say, for example, 10% of the cost of a meal) but that amount won't be figured in to the overall bill.

Another suggestion is that restaurants and other businesses where tips are given would be prevented from suggesting a specific discretionary service charge. All that would be included on a customer's bill would be a note that a service charge hadn't been added – so it would be up to the customer to decide whether or not to leave a tip.

For the full range of options available, check out the full consultation paper.

What are the current rules on tipping?

There are no hard and fast rules, but the practice of employers taking a slice of workers' tips has been against Government guidance introduced in October 2009.

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