Pubs set to charge customers up to 50p for 'simple task' after new law

Man smiling while serving pint
-Credit: (Image: Getty)


Three-quarters of hospitality establishments, ranging from pubs and bars to hotel businesses, have plans set in motion to introduce a service fee for basic services like pouring a beer. This arises following legislative changes effective from October 1, which will put an end to firms skimming off a fraction of the tips left by patrons for staff within the broad hospitality sector, from watering holes and eateries to pizza joints and lodging establishments.

Groundbreaking research indicates that an overwhelming majority of 74 percent of businesses in the hospitality sector are looking to counterbalance this new regulation by tacking on a supplementary service charge. This extra fee sits on top of any gratuities intended for employees and will serve as an additional means to defray company expenses.

Conducted by the tech entity 'three rocks', recognised for its involvement with esteemed chains such as Pizza Hut, TGI Fridays, and The Big Table Group - which is home to brands like Bella Italia, Banana Tree, Amalfi Ristorante, Las Iguanas, and Frankie & Benny's - the study revealed: "Nearly three quarters (74 percent) of UK hospitality companies either already, or plan to, add a service charge as standard for smaller tasks such as serving a pint, preparing a cocktail, checking people in or carrying luggage."

"Nearly one in three operators will add a service charge of between 5-10 percent for such tasks, hinting that the UK could be moving towards a US-style service charge model, where it is customary to leave a 20 percent tip for all sorts of services."

Introducing service charges of 5-10 percent to a pint of beer, where the average UK price is £4.98, would come in between 25p and 50p. However, taking the same approach as the Americans could mean adding a £1 service charge to a pint.

A string of bars and pubs in Scotland, owned by The Scotsman Group, have started to levy a smaller automatic 2 percent service charge on drinks. For example, a pint of Camden Hells Lager at The Grosvenor Cafe in Glasgow, is listed on the drinks menu as £5.95, however customers ordering at the bar are actually charged £6.07.

The new rules are part of the Employment (Allocation of Tips) Act 2023, which was introduced by the last government to stop unscrupulous hospitality businesses from snatching tips that customers wanted to go to staff for offering good service.

Friends enjoying a drink together
Three in four hospitality businesses are set to impose a service charge for simple tasks like serving a pint of beer after a change in the law on October 1 -Credit:Getty

The law is predicted to boost the income of some 4m workers and requires hospitality businesses to distribute 100 percent of customer tips and service charges to staff, with no exceptions other than standard-rate tax deductions. The changes also make it mandatory for all hospitality businesses to have a written policy accessible to staff on how tips are dealt with at their place of work.

However, most firms intend to get around the new law by introducing the service charge, on top of any tip, that they can keep for themselves. A survey by three rocks found the majority of hospitality businesses two in three (63 percent) - currently take a percentage of tips from employees.

It has been revealed that nearly three in ten (29 percent) businesses use tips to cover costs such as card processing fees. Now, these businesses will need to find alternative ways to cover these costs, with most likely to introduce a service charge.

The move to ensure 100 percent of tips go to often underpaid hospitality staff will be welcomed by both the workers and customers. However, according to Three Rocks, businesses stand to lose around £12,000 a year for individual outlets, up to £60,000 for small chains, and as much as £360,000 for large hospitality groups.

As a consequence, the firm warns that several struggling businesses may be forced to shut down. This week alone saw TGI Fridays enter administration, a move that could result in the loss of 4,000 jobs.

Three Rocks' research involved surveying 1,000 hospitality businesses, 1,000 customers, and 500 staff to gain insight into the new government legislation and understand attitudes towards tipping. The study included hospitality businesses of all sizes, from independent operators to national restaurant, pub, and bar chains.

The research found that over four in ten (43 percent) businesses favour establishing a Tipping Standard Practice, an official tip amount implemented 'across the board' for customers and a standard process for businesses to distribute tips to staff.

A significant 73 percent of the 1,000 customers surveyed agreed this was a good idea. Meanwhile, 59 percent of staff are in favour of the concept, with 27 percent stating it would simplify financial planning and an additional fifth believing it would create a more equitable system for all.

In a surprising revelation, Three rocks stated: "The British public also support the Americanisation of tips, with 73 percent of customers agreeing that people should tip when buying drinks at a bar and over a third (34 percent) suggesting they should tip bar staff between 10-20 percent for making their drinks."

Scott Muncaster, founder and MD of three rocks, expressed: "The UK hospitality industry is struggling, and recent government intervention has done nothing to ease concerns from operators. This new legislation, set to come into force in October, will massively increase costs as our research has shown. This, coupled with reports of an outdoor smoking ban proposed by the new Labour government, is cause for concern, and may push many businesses to breaking point in the final quarter of this year and beyond."

Unite's victory

In 2018, Unite union members working at TGI Fridays took historic strike action to secure a fairer tips policy. Fast forward to 2022, workers at Cameron House, the luxury resort at Loch Lomond, in Scotland, reclaimed £138,000 in unpaid tips and service charges after it was revealed that their employer had not been transparent or fair with distribution.

Unite General Secretary, Sharon Graham, stated: "If employers think they can continue to get away with failing to give workers their tips ... they need to think again. Unite will use every avenue to ensure our members secure pay and tip justice."