Why restaurants are now adding an admin fee to your bill too – and we’re all paying the price

A new law on tipping was meant to make things fairer for hospitality staff. Instead, it’s ushered in a wave of confusing new charges – and diners are footing the bill, writes Hannah Twiggs

A reminder that the real cost of eating out often shows up below the line (Getty)

You order two mains, a bottle of wine and finish with dessert at a central London restaurant. The food is excellent, the service smooth – then comes the bill. Below the total, you spot something unexpected: a 12.5 per cent “admin charge”. It’s not labelled as a tip, nor as a service charge. You assume it’s a way of contributing to staff wages, but in reality, it’s not clear who it goes to, why it’s there, or even whether it was optional. “Can I refuse this admin charge?” one diner wrote in the comments beneath a London Centric article on the new fees. “Because I want my tip or service charge to go to the staff.”

This kind of levy is multiplying. From £1 “cover charges” in high-end London venues to 15 per cent “brand fees” in casual chains, the traditional service charge model is being replaced by a tangle of new surcharges. The result is that diners are paying more – but it’s harder to know what for, and restaurant staff may not always benefit.

Until recently, many restaurants routinely added a discretionary service charge of around 12.5 per cent (particularly in London) – an amount typically pooled among staff or handled via a tronc system. But from 1 October 2024 the Employment (Allocation of Tips) Act 2023 came into force: where employers have “control or significant influence” over tips, gratuities or service charges, they must ensure that 100 per cent of those qualifying payments are allocated to workers, and cannot make deductions other than tax or NI.

However, the law only covers what’s defined as a service charge. It doesn’t necessarily apply to other add-ons – “cover charges”, “brand fees”, “admin fees” – that can be treated as business income rather than gratuities. Nor does it clarify whether a diner can easily tell if a fee is optional or mandatory. Consumer protection rules state that mandatory charges must be clearly disclosed on menus or signage, but even then, there’s little to stop a restaurant from inventing a new term and deciding how to allocate it.

That loophole is proving useful. Restaurants are facing a perfect storm of rising costs – rent, wages, utilities and food – coupled with changing diner behaviour. Rather than raising menu prices, which can make them seem uncompetitive, many operators keep headline prices low and bolt on ancillary charges such as “admin fee”, “cover charge” or “sustainability levy”. It’s psychological pricing: £16 for a burger looks better than £18, even if the small print pushes you past that total.

With the new tipping law limiting what they can retain, some operators are rebranding service charges entirely. At Harrods, for instance, a £1 cover charge was introduced on top of an existing 12.5 per cent service charge. Staff questioned whether the additional fee should, under the spirit of the new law, also go to them, and some are reportedly considering legal action. The now-closed dim sum chain Ping Pong took the idea further, replacing its service charge with a 15 per cent “brand fee” to cover franchise and marketing costs – a move that drew union criticism at the time for confusing customers who assumed it was a tip.

Elsewhere, fees are becoming even more inventive. The Pig & Butcher in Islington now adds a £1.23 “carbon-free dining” charge to each bill, claiming to fund environmental initiatives such as tree-planting. The restaurant says it’s optional, but diners have taken to social media to question its inclusion. “These kinds of extras can be incredibly confusing,” one customer posted. “I just want to know what I’m paying for.”

That confusion extends beyond diners. For staff, the proliferation of differently labelled charges can mean uncertainty about income. One bartender said she relied on the service charge to top up her wages: “Now they’ve changed the wording and I don’t know if I’ll see that money.” The result is a growing disconnect between what customers think they’re leaving and what workers actually receive.

Every diner at Harrods now pays a mandatory £1 cover charge on top of the 12.5% service fee (Getty)

The underlying reasons are economic. The cost of running a restaurant has ballooned in recent years – some industry analyses show food-price inflation of over 25 per cent between December 2021 and December 2023, according to the Institute of Hospitality, and many operators say overall overhead costs have risen significantly. Energy bills and supplier prices have climbed, while minimum wage rises and staff shortages have pushed payrolls higher. At the same time, diners are eating out less frequently and spending more cautiously. Rather than pass those increases on through higher menu prices – which could deter bookings – restaurants are looking for ways to cover costs without scaring off customers. Rebranding or layering on additional fees allows them to recover some of that money while keeping their prices looking competitive.

Still, it’s a risky strategy. What began as a well-intentioned attempt to clean up tipping practices has created a new grey area around transparency. Unions argue that “admin fees” and “brand charges” undermine the spirit of the law by disguising profits as service. Consumer rights experts warn that undisclosed or misleading charges could amount to unfair practices. And as diners share screenshots of their receipts online, public scrutiny is intensifying.

There’s also a cultural shift happening. The UK has long prided itself on discretion around tipping – a flexible gesture of appreciation, not an obligation. Yet as more London restaurants adopt American-style automatic service charges and non-optional fees, that sense of choice is eroding. In the US, diners are accustomed to mandatory 18 or 20 per cent gratuities and surcharges for everything from kitchen staff to healthcare benefits. Here, the idea of paying for “ambience” or “admin” still jars. What was once a voluntary reward for good service is becoming an unavoidable fixture of dining out.

Service, tip or ‘admin’? Restaurants are adding new charges that leave diners guessing what’s really on the bill (Getty)

For customers, the impact is twofold: your meal costs more than the menu suggests, and your money may not go where you think. If a charge isn’t called a service charge, it may not legally have to be given to staff. If it isn’t clearly marked as optional, it should be explained before you order. And if you want to ensure your tip reaches the people who served you, it might be wiser to ask – or tip in cash.

For staff, the stakes are higher still. While some venues have adopted transparent tronc systems that fairly distribute service charges among front and back-of-house teams, others have replaced that structure with company-managed “fees” that flow straight into overheads. The result, according to some workers, is smaller pay packets and less trust. “Restaurant prices are essentially a collective action problem,” one commenter observed. “Pretty much every restaurant feels impelled to have misleadingly low menu prices, but if they all did the honest thing and priced properly, it’d be fine.”

The rise of admin and cover charges says something larger about the state of British hospitality. Restaurants are adapting to survive – squeezed by inflation, labour shortages and shifting dining habits – but in doing so, they’re testing the limits of customer goodwill. Most diners don’t begrudge paying fairly for good service, but they do expect transparency. Being asked to contribute to “admin”, “brand” or “carbon-free dining” without a clear explanation risks breeding resentment rather than loyalty.

The fix is simple: clarity. Diners deserve to know whether a 15 per cent fee funds staff wages, tree planting or a restaurant’s electricity bill. Staff deserve to know how their pay is calculated. And restaurants deserve to be honest about the realities of running a business in 2025 without hiding behind fine print.

Next time a mysterious line appears on your bill, pause before you pay. Ask what it’s for, who benefits and whether it’s optional. If the answer isn’t clear, you’re not being difficult – you’re being informed. Because the real cost of eating out today isn’t just what’s on the plate, but what’s quietly added afterwards.