It is looking at how tips are handled as some restaurants take a percentage for administrative costs while 1 in 5 takes all the tips.
This follows reports that some restaurant chains are regularly holding back some or all of the tips meant for their staff. The investigation will consider whether there should be a cap on the proportion of tips businesses can withhold.
Trade union Unite opposes this, however, saying it would be “impossible to enforce”. Javid has ordered a formal call for evidence which will end in November. The investigation will look at how tips left by customers are handled after recent reports found that a proportion of tips at some restaurants were being spent on administrative costs.
There is a voluntary code of practice but restaurants can adopt their own systems.
Unite officer Dave Turnbull said the union was pleased that “the government has woken up to this scandal” but an effective solution needed careful consideration. “Capping admin fees will simply legitimise the underhand practice of restaurants taking a slice of staff tips and be near enough impossible to enforce,” he said.
“Rather than tinkering around the edges, Sajid Javid should be looking to scrap what is effectively a tax by restaurant bosses on money meant for the pockets of hardworking staff,” he added.
Javid said the government wanted a “fair deal” on pay for working people and that this included “taking action on tipping abuse. I’m concerned about recent reports, suggesting some restaurants pocket tips for themselves. That’s just not right,” he said.
“I’ve ordered an immediate investigation to look at the evidence and consider the views of employees, customers and the industry to see how we can deal with the abuse of tipping.”
Capping admin fees will simply legitimise the underhand practice of restaurants taking a slice of staff tips and be near enough impossible to enforce.
As part of the investigation information and views from the hospitality industry and other key stakeholders will be sought. This will help the government decide if ministers need to intervene to strengthen the voluntary code of practice.
Ufi Ibrahim, chief executive of the British Hospitality Association, said the body “would welcome dialogue with the business secretary on the matter of tipping and the industry code of conduct.”
Most chains use a tronc system, where all the tips are collected together and distributed evenly through the staff, usually with around 70% going to the waiters, and the rest given to kitchen and other workers.
There is no law regarding how a tronc is divided, however. Research from 2009 found that one in five restaurants did not pass tips to their staff, yet the vast majority of customers said they wanted waiting staff to receive the money left for them, the government said.
