The tips loophole: Restaurant accused of using service charge to pay managers

Last Friday, as diners enjoyed a meal at the upmarket London restaurant STK, a noisy protest took place outside. The campaigners were calling for a fairer tip policy after the trade union Unite accused the restaurant of using a service charge intended for front of house and kitchen staff to top up managers' wages.

Several of the staff working that evening say that once the protest started, managers suspended the 15% service charge on customers' bills until after the campaigners left. The manager of the hotel in which the restaurant is based disputes this however, and the company has since sent a receipt for a meal bought during that time period showing the service charge included.

"It was one of the most stressful shifts I've ever done," Henry (not his real name), who has worked at the restaurant for around two years, says. "I don't know why they stopped the service charge that night. Perhaps to punish us for speaking out [a story had just been published in the Evening Standard about the dispute] or perhaps as a warning." 

The staff I spoke to say they work on zero hours contracts and that over the last year many people have left and have not been replaced, meaning the existing staff are working much harder for the same money. One told me that waiters used to be expected to take care of three tables in their section but now it's more likely to be eight or nine. We put these allegations about zero hours contracts and a spiralling staff workload to the hotel but they did not respond.

"This is a high end restaurant and we are expected to provide a five star service," Henry says. "We are being worked very hard, they just care about getting the money in, they don't care about us."

Unite claims that several managers are paid the same basic rate as waiters but are having their salary boosted to around £50,000 by the service charge. In 2009 restaurants and bars were banned from using tips to top up staff wages to the legal national minimum, but the union says STK has found a loophole which is allowing them to subsidise managers’ wages above and beyond that.

"It is the ultimate kick in the teeth for customers and staff alike if restaurants are allowed to dip into tips and the service charge without a shred of transparency of how the money is being used or who is benefiting from it," says Unite national officer Rhys McCarthy. "If managers are not prepared to reveal what portion of the service charge and tips they are pocketing, then they should leave them alone."

The restaurant uses the "tronc" system, which is supposed to ensure tips are split equally between staff, but as Henry explains, employees are kept in the dark as to how their share has been calculated.

"We never know how much we will get, most months it's a disappointment." he says. "You can't plan anything because you never know how much you will earn. It's no life. We are so short staffed that I have worked continuously for months and months without a holiday."

The employees say they have asked the management for a clear breakdown of their service charge allocation but were refused. Hannah (not her real name) is a waitress at STK and says that their pay slips often don't make sense.

"Even though we use the tronc system, sometimes one person can do the same hours but get paid less money than someone else. I don't understand it" she says.

Melia Hotels International, the Spanish-based owners of ME London hotel, has signed a global agreement with the International Union of Food, Agricultural and Hotel Workers to promote ethical standards, including the right of workers to organise collectively but Unite say that the company is now refusing to recognise the union.

All the staff spoke to say they fear for the future. They feel powerless, trapped between needing a job and hating how they are treated. They say that morale is low among staff throughout the hotel, from the front of house team, to kitchen workers, to waiting staff.

"I'm really scared about what's going to happen, especially if they remove the service charge again, like they did on Friday," Hannah says. "It was only a couple of hours but I know I would have lost a lot of money. Sometimes they make me feel like an animal."

Jack (not his real name) has worked at the restaurant for around a year. "Since all this started they have been really rough on staff, personally I feel like they are trying to get rid of us all so they can bring in new staff who won't complain."

The dispute follows several other high profile campaigns against restaurant chains over their tipping policies. Earlier this year the business secretary Sajid Javid, launched an investigation into the abuse of tipping.

Despite their anger over their treatment, the staff seem to have a real loyalty to the restaurant and are concerned that customers are not affected by the current situation. They say that during the protest on Friday, many customers were asking what was going on and were shocked to find out that the full service charge wasn't going straight to waiting and bar staff.

Jack says he hopes the battle for fair tips at STK inspires other hotel and restaurant staff to stand up to their employers. "I know this is a problem in many other places in London but people don't know they can fight for their rights. If we win here, maybe we can make real change."

The hotel manager Guillaume Marly, says that there was no suspension of service charge at any time during Friday or over the weekend.

"ME London follows standard hospitality industry practice through the use of the tronc system," Marly says. "We are currently reviewing the service charge policy and have made great progress in our discussions with our employees and the union, to ensure that it reflects our staff and customers’ views.

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