Tipping the balance: the end of the service charge?

30th Jun 2016

Most Britons believe that service charges should no longer be added to bills in restaurants, pubs, cafes or hotels in the UK, according to research published today by the Institute of Customer Service.  Many also want to see the Government change consumer protection laws to ensure there is greater transparency about service and cover charges in the leisure, hospitality and tourism sectors.

As part of its response to the Government’s consultation on tipping, gratuities and service charges, The Institute surveyed 2,014 consumers and business executives.  Key findings revealed that:

- 63 percent want to see the removal of discretionary service charges from the bills they receive
- 58 percent think that the entire tip should go to employees (except deductions required for tax)
- 83 percent argue that Government should amend consumer protection laws so that businesses are clearer about the cost of cover charges.

Commenting on the consultation, which is led by the Department for Business, Innovation and Skills, Jo Causon, CEO of the Institute of Customer Service, argues that “a new normal is needed, where greater transparency inspires greater trust between consumers and organisations.”

She says: “The current lack of clarity, consistency and understanding around how service charges are paid to, and received by, employees is creating mistrust amongst consumers and dissatisfaction amongst employees.  Customer priorities are changing.  They are more concerned with employee attitude, behaviour and competence than they are with price – and they want to reward great service properly.  We also know that engagement increases when employees feel they are treated fairly, meaning that a transparent approach to tipping is more likely to build engagement and, with it, excellent levels of service.”

Against the backdrop of the survey findings The Institute has responded to the Government’s consultation by suggesting that businesses should no longer outline a specific amount to customers for discretionary service payments.  It also argues that - to build long-term sustainable relationships between businesses, customers and employees – a new norm should be created in which:

- customers are able to offer payments for service directly to those who serve them, only if they choose to and at a level they think appropriate
- employees understand that if they work hard to provide an excellent service they will be the direct recipient of any reward payments
- customers can be confident that a business will not ultimately receive any proportion of their payment and they are rewarding just the employees
- businesses understand that this arrangement is beneficial for them as they will gain from more engaged staff, delivering better service and therefore improving their long-term relationship with customers.

Causon concludes: “Without regulation, an ongoing sense of confusion is harmful for business in the long term as it undermines employee engagement and erodes customer trust. Getting the basics right is not easy, but by increasing transparency, we are more likely to improve the customers’ experience, increase employee satisfaction and encourage long-term relationships that drive the economy.”

The Government’s consultation document can be found
here, and our full response is available to read here


Notes to editors
For further information please contact: 
Mike Petrook and Helen Glover
E: [email protected] and [email protected]   
T: 020 7260 2631 (Mike) or 020 7260 2698 (Helen)

About The Institute of Customer Service
The Institute of Customer Service is the professional body for customer service delivering tangible benefit to organisations and individuals so that our customers can improve their customers’ experience and their own business performance.  The Institute is a membership body with a community of over 500 organisational members – from the private, public and third sectors – and over 4,000 individual memberships.  For more information about the Institute of Customer Service go to www.instituteofcustomerservice.com.

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