A London restaurant chain has banned customers from paying a tip by card and introduced a “brand” fee instead, just three months before new legislation makes it compulsory to give all tips to staff.
Ping Pong, which operates five dim sum outlets in the capital, said the new optional 15% charge would go towards “franchise fees and other brand-related expenditure”, and replace a 12.5% service charge, 90% of which went to staff.
The company said the idea was being tested as an alternative to increasing menu prices and it would be “reviewing all constructive feedback before making a final decision” in June. At that point, it will decide whether to make the fee compulsory, increase product prices or implement a mixture of both.
The chain’s parent company, AJT Dimsum, said it had increased staff wages by 19% from £10.42 to a minimum of £12.44 an hour – £1 above the new legal minimum – which it said would “match earnings they would have received with service charge distribution”. Customers will still be able to leave a cash tip if they want to. However, many customers no longer carry cash.
It said restaurant teams would also have the potential to earn an additional £1 or £2 an hour in bonuses based on hitting sales targets.
Bryan Simpson, the lead organiser for hospitality at the Unite union, said that offering just £1 above the minimum wage to replace “a healthy per hour tip rate” was “a complete slap in the face” for workers.
“Ping Pong’s decision to effectively deny workers tips by cynically changing the service charge to a ‘brand charge’ in order to circumvent the new fair tips legislation is one of the most blatant examples of tips theft that we’ve come across as the union for restaurant and bar workers,” he said.
“No matter what senior management call it, customers will assume that this 15% is a tip that should go to workers, but it won’t. That is completely disingenuous.”
The union said it was planning a national campaign for fair tips ahead of July to ensure restaurants did not replace the service charge with “outrageous policies”.
AJT Dimsum said: “The business is very proud of the reputation it has as a good employer and, despite the many recent headwinds, has acted with integrity and honour, with a high priority placed on employee retention. The benefit to our employees will be stability of wages throughout the year, reducing the impact of seasonality and the higher wages will also mean improved access to financial products such as loans and mortgages.”
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Additional wages, instead of a bonus via the service charge, may mean higher taxes for employees in the short term as they require national insurance contributions but could result in potentially better pension payments down the line.
Ping Pong is likely to be just one of many restaurants that will change the way they charge customers system before the new legislation that will force restaurants to hand over all service charge money and tips to workers.
The law will be introduced after it emerged that many businesses were using the card-based fees to underpin profits rather than reward waiting staff and chefs.
The government hopes that the law will put an estimated £200m more into workers’ pockets but restaurants have said they fear it will add to costs at a time of high inflation and lacklustre consumer spending.
