Johann Hari: The shameless scam of restaurant tips

When you pay a £2 service charge at a Holiday Inn, £1.50 is pocketed by the company

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Once upon a time, I was the world's worst waiter. There is one shift I still rerun in my stress-dreams; I managed to tip a roast duck down a woman's cleavage and serve a toddler neat vodka. It all ended when I had a row about immigration with a customer – he was ranting to his table about "the Pakis" – and I served his lemon sole in mushroom sauce into his lap. I did not receive many tips.

But if I had, they would have been mine, to take home and spend. Today – thanks to a loophole in Britain's employment rules – that is no longer the case. When you leave a tip for a waiter, many restaurants are pocketing the cash for themselves. And – worse still – they are using them as an excuse to legally pay less than the minimum wage. The story of how this came to pass tells us a lot about how poorly we are protected in the workplace.

This tipping scam began with the introduction of the chip-and-pin system in 2004. Up to that moment, tips were left in cash, on the table. The waiters picked them up and pocketed them; end of story. But with this new system, more than half of all tips are now paid by credit card. When we do this, most of us imagine this is totted up at the end of the night and handed to the waiting waiting staff. We are wrong.

Legally, this money is the property of the employer. They can do whatever they want with it – and many add it to their profits. When you pay a £2 service charge at a Holiday Inn, £1.50 is pocketed by the company. The staff scrambles for the remaining 50p.

Many British restaurants go even further. If glasses or plates are broken – as they inevitably are when you're rushing around juggling food at 11pm on a Saturday – the cost is taken from tips. If a customer runs off without paying, that is taken from tips too.

But there is a bigger con still. We think of the tips we leave as a bonus on top of a waiter's wages. But many of Britain's most lucrative restaurant chains – including Café Rouge and Carluccio's – pay less than the minimum wage, and claim the plundered tips raise the waiter's income to the legal minimum. Despite raking in £4.8m in pure profit last year, Carluccio's pay their waiters £1.60 below the mandatory £5.52 for those aged 22 and over.

Oh, and take this with your bread basket: several companies sack the staff who try to keep the tips intended for them. Pizza Express pockets an 8 per cent "admin charge" on all tips given by chip-and-pin. When their 20- year-old staff member Nabil Guirguis started informing customers about this, and said he would prefer a cash tip, they fired him. (They claim he was "misleading" customers.)

Staff at the Restaurant Group – which owns Garfunkels, Chiquito and more – only last week told staff they too will be sacked if they encourage a cash tip.

My friend Miloscz, who works as a waiter, says: "When you are working 14-hour shifts for less than a fiver an hour, the last thing you need is your boss snatching away money the customer thinks he was giving to you. It drives you mad when at the end of the night your feet are killing you and you see 20 quid taken out of your tips to pay for some bastard who didn't pay, or 'admin', or a broken plate."

The trade union Unite has been calling for Gordon Brown to change the law to make this illegal. The minimum wage should do what it says on the tin – act as a legally enforced minimum – with all tips on top, and they should be the full property of the waiting staff.

But this is only the first sliver of the programme we need now. The Labour government's greatest achievement – the minimum wage legislation – needs to be tightened. Today, if you fail to pay the minimum wage, you are taking almost no risk at all. The odds of being caught are tiny: at the current rate of inspection, you will be checked once every 330 years. (All your waiters will be dead by then.)

And if you are caught underpaying, what happens? Some 95 per cent of criminal bosses are simply required to pay the backlog. Imagine if 95 per cent of burglars were merely required to give back what they had stolen, and you get some idea of how powerful the deterrent effect is.

Of the tiny fraction who are both caught and punished, the maximum possible fine is £5,000. By contrast, if you fake the Nike or Adidas logo and print it on clothing, you face up to seven years in jail. Rip off the rich and we'll hammer you; rip off the poor and you're asked politely not to do it again.

There are some signs the Government is beginning to see that strengthening basic protections in the workplace could be a vote-winner against the regulation-bashing David Cameron. The Tory leader and his coterie opposed the minimum wage vehemently, but they now realise it is too popular to abolish – so they will whittle it down with below-inflation increases and even-fewer inspections (once every 500 years?).

That's what George Bush did across the Atlantic – and Shadow Chancellor Gideon "George" Osborne notes dryly: "We have a lot to learn from Bush's compassionate conservatism."

This would only be the first step in undermining our already weak protections. Cameron says it will be a "top priority" to withdraw from the European Social Chapter – even though this would abolish rights to four weeks of paid holidays for 10 million part-time workers.

If Labour loudly pursued the opposite path – calling for our workplaces to be more human and humane – this could be a strong populist cry. The beginnings of a package are in sight: Business and Employment Secretary John Hutton has just announced he will double the number of minimum wage inspectors (once every 165 years?), and launch a crackdown in catering, where abuses are worst.

In one of his best decisions since he became Prime Minister, Gordon Brown has announced that our two million agency workers will be legally granted equal rights.

If this is rolled into an electoral parcel with a hike in the minimum wage and the Unite proposals for fair tips, it would be good politics as well as good policy. Brown could offer the electorate the choice: do you want to live in a Labour country where your workplace is regulated and respectful, or in a Tory deregulatopia where even the tips you leave can be snatched from the harried hands of your sub-minimum wage waiters?

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