Pubs looking to charge as much as 50p for pouring a pint as new tipping law introduced

The end of the month will see a further 2,000 businesses in the hospitality industry closing down, with most operators looking to introduce a service charge on smaller tasks

Three-quarters of hospitality venues, from pubs and bars to hotels, are set to introduce a service charge for basic tasks like pouring a pint. This move comes in the wake of new laws coming into effect on October 1, which will stop businesses from taking a cut of tips left by customers for staff across the hospitality industry, including pubs, restaurants, pizzerias, and hotels.

A landmark study has found that a staggering 74 percent of hospitality businesses plan to offset the impact of this legislation by adding an extra service fee. This additional charge will be applied on top of any tips given to staff and is intended to help cover business costs.

The research, carried out by tech firm ‘three rocks’, known for its work with renowned chains such as Pizza Hut, TGI Fridays, and The Big Table Group owner of brands like Bella Italia, Banana Tree, Amalfi Ristorante, Las Iguanas, and Frankie and Benny’s disclosed: “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.”

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“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.”

Popping down to your local for a swift pint might soon come with an extra bit on top as, under the new rules implied by the Employment (Allocation of Tips) Act 2023, almost a third of pub and bar operators in the UK are considering adding service charges ranging from 5-10 percent. This shift signals a potential move towards an American-styled tipping culture, where leaving a generous 20 percent gratuity is the norm, reports Lancs Live.

The addition of a 5-10 percent service charge would add roughly 25p to 50p to the cost of the average British pint, currently priced at £4.98 – but adopting a full-on Stateside approach could see beer lovers shelling out an extra pound per pint in service fees.

Some drinking establishments are already taking steps towards this new paradigm; patrons of The Scotsman Group’s Scottish bars and pubs, including The Grosvenor Cafe in Glasgow, now find a modest 2 percent service charge automatically tacked onto their bill. A punters’ favourite, Camden Hells Lager, which appears on the drinks menu at £5.95, ends up ringing in at £6.07 once the extra charge is accounted for.

Designed to combat unfair practices by hospitality venues that pilfered tips meant for their hard-working staff, the recent legislation dictates that 100 percent of all tips and service charges collected must go directly to those providing the service, minus only the usual deductions for taxes. Furthermore, it’s compulsory for hospitality businesses to draft and make available a clear, written policy detailing how tips are allocated amongst staff, ensuring transparency and fairness in these newly regulated transactions.

However, many businesses plan to circumvent the new law by introducing a service charge on top of any tip, which they can retain for themselves. A survey by Three Rocks found that the majority of hospitality businesses – two in three (63 percent) – currently take a percentage of tips from employees.

It has been disclosed 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 result, the firm warns that several struggling businesses may be forced to close. 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 discovered that over four in ten (43 percent) businesses are in favour of establishing a Tipping Standard Practice, a uniform tip amount set ‘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 support 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 said: “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, said: “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.”