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Saturday, 9 October 2010

Service charges, tips, gratuities and cover charges

It’s good practice for businesses to give their customers information about their tipping policy. Find out about service and cover charges, tips and gratuities in restaurants, casinos, hotels and other businesses.

What are the different charges?

There are several different types of 'tips', each charge has a slightly different meaning and way it is handled

Service charge

The service charge is an amount added by a business to a bill. It is based on a percentage of that bill. If it is 'discretionary' or 'suggested' it is up to you to whether you pay it.

Tips and gratuities

Tips and gratuities are voluntary payments you give, over and above the amount of the bill and any service charge. They are a personal reward from the customer to the worker. Usually, tips are cash, whereas gratuities (or card tips) are payments made electronically through a card terminal. It is up to each business to decide if tips and gratuities are treated differently.

Cover charge

A cover charge is a fixed charge per customer which is usually mandatory. This means you have to pay it. Tariffs (such as price lists) or, in the case of restaurants, menus must state any mandatory charges.

Information restaurants might give to you

The Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges (the Code), recommends that businesses should clearly display and make accessible their policy on tips before you buy anything.

The information should cover:

  • whether a charge is mandatory or discretionary (meaning whether you have to pay it or not)
  • whether money is taken by the business to cover any costs from handling these charges (such as credit or and banking charges, payroll processing costs)
  • whether cash tips and card tips are handed out to workers differently
  • how the money is shared between the business and the workers

The business should have a process to deal with requests from customers about:

  • how tips are given out
  • who tips are given to
  • any deductions from the tips, including how much is deducted and why

Where can you find this information?

There are a number of ways a business can make tipping information easily available on to you. For example:

  • on door stickers or wall notices or on menus displayed outside the venue
  • on a menu in restaurants and cafes
  • in casinos, in the reception area and/or at the gaming table
  • on the bill
  • in a bill folder or on a 'tips' tray

In addition, businesses should make sure that workers can direct you to further information, for example, a written statement setting out their policy. Businesses could also make further information available through their websites or on promotional material.

Consumer protection rights mean that the information the business gives you must not be misleading.

Tipping and staff wages

An employer can no longer put tips towards a member of staff's National Minimum Wage (NMW) rate. Other than the NMW requirement, an employer can handle tips according to their own policy.

If you are a worker who receives tips as part of their pay, you can find out your rights in the Employment section.

Where to get help

Businesses do not have to follow the Code, it only shows good practice when dealing with tips.

If you feel that the information a business has given you on tips was misleading, you can contact Consumer Direct.

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