A London restaurant chain has stirred debate by banning customers from tipping via card and introducing a “brand” fee instead, only three months prior to the enforcement of legislation mandating the allocation of all tips to staff.

Ping Pong, which runs five dim sum establishments in the capital, announced that the new optional 15% charge would contribute towards “franchise fees and other brand-related expenses,” supplanting a 12.5% service charge, 90% of which previously went to staff.

The company explained that the initiative is being trialed as an alternative to raising menu prices, promising to consider all constructive feedback before finalizing its decision in June. At that juncture, Ping Pong will determine whether to make the fee compulsory, adjust product prices, or adopt a combination of both strategies.

AJT Dimsum, the chain’s parent company, disclosed a 19% increase in staff wages from £10.42 to a minimum of £12.44 per hour – £1 above the forthcoming legal minimum. They asserted that this adjustment would “equivalent the earnings they would have received through service charge distribution.” Notably, patrons will still have the option to leave a cash tip, although the prevalence of cashless transactions may impede this practice.

Moreover, restaurant teams stand to earn an additional £1 or £2 per hour in bonuses contingent on meeting sales targets.

Bryan Simpson, the lead organiser for hospitality at the Unite union, condemned the wage adjustment, describing the offer of just £1 above the minimum wage as “a complete slap in the face” for workers.

“Ping Pong’s decision to effectively deny workers tips by cynically changing the service charge to a ‘brand charge’ to evade the forthcoming fair tips legislation is one of the most blatant examples of tips theft we’ve encountered,” Simpson asserted.

He added, “Regardless of the label senior management affixes to it, customers will assume that this 15% constitutes a tip intended for workers, which is disingenuous.”

In response, the union announced plans for a national campaign advocating for fair tips before the legislation takes effect in July, aiming to prevent restaurants from adopting “outrageous policies” in lieu of service charges.

AJT Dimsum defended its position, stating, “The business takes pride in its reputation as a responsible employer and, despite recent challenges, has acted with integrity and prioritised employee retention. Enhanced wages will provide stability throughout the year, mitigating the effects of seasonality and facilitating improved access to financial products such as loans and mortgages.”

However, the shift towards additional wages, rather than bonuses funded through service charges, may result in higher taxes for employees initially due to national insurance contributions. Yet, it could lead to potentially better pension benefits in the long run.

Ping Pong’s decision is likely to be just one of several adaptations by restaurants ahead of the impending legislation, which aims to ensure that all service charge funds and tips are distributed to workers.

The government anticipates that this measure will inject an estimated £200 million more into workers’ earnings. Nevertheless, restaurants express concerns that it will amplify costs amidst high inflation and subdued consumer spending.

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London restaurant chain faces criticism as it replaces card tips with ‘Brand Charge’ amid pending law changes