Will the Pandemic’s Impact on Restaurants Include the End of Service Charges?

Two top-level London restaurants have announced that they will remove the longstanding, widely applied 12.5 percent service charge from their menus when they reopen following lockdown. Broadway Market butcher and wine bar Hill and Szrok and modern Turkish grill and bakery Oklava each announced last night that the pandemic had given them the opportunity to amend their pricing structure in order to improve the security of staff wages.

Both restaurants will remove the optional supplementary charge and incorporate it into the cost of every dish on the menu. Prices will rise, but so too will staff wages — with chefs and waiters being guaranteed a complete monthly take-home, which will replace a legal minimum or inferior basic wage topped up by pooled service charges and tips. One of the inherent issues with the 12.5 percent charge is that, even when it all goes to staff, it is often used to form part of a wage. It is not, as some customers might imagine, additional to the wage.

Hill and Szrok wrote on Instagram yesterday afternoon that as it began a return to “normal” it realised that “normal wasn’t working” and the crisis period — referred to as “weird times” — “had given everyone a chance to pause for thought, to re-evaluate.” As they began to reopen for private dinners and return to service, they decided to scrap the service charge.

Hill and Szrok added:

The furloughing of restaurant and FOH teams up and down the country has laid bare a system that is at best, unfair, and at worst, total bullshit. The standard practice at most restaurants (including, until recently, ours) is to pay all staff on a base rate, usually nothing more than minimum wage, and then top this up with tips to get to something that people can actually survive on.

For many in the hospitality industry, the furlough scheme — introduced by the government to cover up to 80 percent of staff wages during lockdown, while their employer was unable to operate — laid bare flaws in the way restaurant staff are remunerated. Because the government excluded tronc (service charge) payments from the calculation, the majority of workers have received far below 80 percent of their regular monthly wage: Hill and Szrok said that restaurant staff received as little as a third of normal pay, while Oklava owner Selin Kiazim cited a 50 percent reduction for her employees.

Though the tronc issue has been the source of procedural debate throughout lockdown — with one high-profile restaurant owner calling it an “extraordinarily discriminatory ruling” and politicians latterly concluding that the policy should be amended — it has given these restaurants the opportunity to address a deep-rooted inequality in the pricing and payment structure of restaurants. A system which Hill and Szrok said allowed “businesses to spend as little as possible out of their own pocket, skimming the rest from service charge.”

The service charge, Kiazim said, “while optional for our guests, has never been optional for us. Without it, we would not be able to pay our skilled staff the wage they deserve and would simply not have survived as a restaurant.” A necessity, which is partly cultural, to present the cost of a meal as lower than it actually is to the customer has meant insecurity for workers’ wages; it is this that these operators want to change. While there are London operators which do not apply service charge — St. John Bread and Wine, 40 Maltby Street, and P. Franco are a minority which have eschewed the norm — until now, making this switch has not been easy. Service charges, perceived as both discretionary and reserved for service staff have become one of eating out’s most rigid customs; few refuse to pay it, few question how it is administered; few wonder the implications of its removal.

Kiazim wrote that “it can be hard to break the mould, but the coronavirus crisis has broken the mould for us and we would like to embark on this new ‘normal’ of the post-lockdown world with policies we really believe in.”

“As businesses, we’ve been cashing in on a system that’s meant to be a gesture of gratitude. Tips should be a way for customers to say thanks to staff for looking after them, not to pay them for coming to work,” Hill and Szrok announced. “As we absorb the extra cost, prices will be going up, but so will the wages of our team. Customers will need to accept the slightly higher prices, staff will have to take a small hit on their taxes and restaurant owners will have to stand up for the people who make their business run.”

Whether others follow these two restaurants remains to be seen, but it’s clear that the pandemic has not just spotlighted some of the restaurant industry’s underlying issues. It has also given operators the space to rethink, reassess, and, in some cases, start again — with practises put in place to improve the health of restaurants and the security of their workers. For bigger operators, whose business models may be less agile and whose customer base is more disparate, more difficult to communicate with directly, the practical implications of such a change could present more challenges.

Yet for the more boutique operators, with a community of regulars, there’s receptiveness if not guaranteed acceptance. With an all-inclusive listed menu price, “you (and us too) will be confident this goes towards a healthy restaurant with staff that are paid what they deserve,” Kiazim wrote. “Hospitality is a career as valid as any other, and we will no longer be making a large portion of our staff’s wages open to discretion. We have wanted to scrap service charge for many years, but in all honesty we haven’t had the confidence to take the step.”