The Danger of Being Reliant on Service Charge in London.
- by Chief Vampire Pete Clucas
I was a waiter when widespread service charge came into place, I worked in a high-end steak house so did well from it but my peers were divided on the matter.
The Con: You had to share with BOH and Managers.
The Pro: You never got stiffed on a tip.
While it initially worked in my favour, I came to loathe Service Charge Culture. I felt that it was detrimental to good service. When service charges replaced payment to payment gratuities a complacency culture emerged among some front-line hospitality workers who knew they would receive service charge whether they did a good job of looking after their guests or not. This divided teams as it became difficult for those of us who cared as portion of slack appeared that needed picking up – so while some were paid more for being lazy, some worked harder for less.
It is widely accepted that TRONC distribution is subjectively corruptible. There is no industry-wide transparency, too much grey area and the heavily reported mismanaging of monies has led to a decline of consumer confidence in the Hospitality Sector – it is so sad to overhear diners in restaurants ask ‘Do you actually get the service charge?’ when they are presented with the bill.
Tipping used to be such a simple affair for everyone involved. Most people paid in cash or at least carried it, there was always something left over – ‘keep the change’, ‘give us a fiver back’, ‘get yourself a drink’ were commonplace farewell exchanges. Servers tipped out 10% to the bartenders for making drinks while the bar team also made tips from serving guests over the bar. At the most lucrative point of my FOH career I even received an additional commission of 6% on anything over a £1000 sales while working at TGI Fridays and I can honestly say I have never worked in a more proud or motivated team. But the way we pay restaurant bills has changed; Contactless payments have usurped cash as the norm for small transactions – say, over the bar, for split payments on bills or for a quick lunch - and so the step of tipping is entirely missed in the payment process.
Granted the Floor Server still accrues service charge for the TRONC pot by serving tables. But the rise of Contactless and demise of cash transactions mean that unless you’re the kind of operator who applies service charge to drinks served over the bar (you should try not to be), then your bar produces less gratuities and so there is less to go round between the FOH and BOH teams.
Being aware of the challenges Service Charge Culture presents, I have attempted to eliminate service charge in several venues over the last 5 years both as an Operator and Consultant with the aim of restoring tipping culture and consumer confidence but the fact is that in the 15+ years since HMRC first investigated taxation of gratuities and the ubiquitous 12.5% signoff on bills was introduced, Londoners have simply forgotten how to tip.
In North London the magnificent Ceremony restaurant is ahead of the curve with its ‘Hospitality on The House’ ethos that pays well above the mean with slightly higher pricing and flawless transparency. This is fantastic and works well in this formal dining atmosphere.
The challenge we faced at Lost Boys Pizza was that our staff were not being incentivised for deliveries and takeaways. As we approached the end of our third quarter, off site sales were regularly accounting for 25% of revenue - ergo 25% more prep in the kitchen for zero service charge in the pot. We took the decision to change the way approach our payroll.
We have now introduced a hybrid system; a flat 10% service charge on table service (not 12.5, we are Casual) and a callback to our most motivated years – commission on gross sales. Our staff receive a growing hourly wage starting at a fair £9.00 and climbing with economies of scale reflecting our gross sales. The thriving takeaway arm of our business is welcomed with enthusiasm by our team, eyes never roll at a ringing phone or a bleeping tablet. Bartenders are happy to prep pizza dough and waiters frequently offer to jump in and attack piles of pots and dishes that need washing (by hand, with a sponge scourer). Our team are more invested in our continued successes and work as fantastic ambassadors for our brand. This approach costs us more on the people front but we are undoubtedly busier and our staff are happier for it so the money is there to spend. After all we are not the food business serving people, it’s the People Business serving food.