Harrods is introducing a 'cover charge' of £1 per diner at all its restaurants and cafes in London, following a government crackdown on businesses taking a cut of tips, which employees say will cut into profits. The aim is to raise up to £1 million.
The luxury department store owner received £180m in dividends last year but also charges customers a 12.5% service charge, all of which will be paid to kitchen and restaurant staff from 2022. A further £1 cover charge has been retained by the company.
This price means a cappuccino costs £8.31, including a £1 cover charge and an 81p service charge.
The charges emerged as more than 100 Harrods employees prepare to strike on December 21, 22 and 26 over pay and conditions, including concerns over the distribution of customer fees at the restaurant.
Employees said the imposition of a cover charge, first piloted a year ago and now in force across all Harrods London restaurants, had hit their incomes as customers canceled optional service charges. He said he was concerned that he might give it away.
They are calling on Harrods to either cancel the cover charge or share it among staff, and to be more transparent with staff about how service charges are allocated.
Workers say Harrods is earning more than £2,500 a day in cover charges and is considering raising it to £2 a day.
Alice Howick, a waitstaff at Harrods, said: “Given that there is no cover charge law at the moment, this appears to be a loophole that companies are exploiting to make more profits as a result of inflation. I feel it.'' They also said they introduced a cover charge to protect their menu prices so they don't have to keep increasing menu prices.
“It has not been distributed to staff and we feel that we have fallen victim to that, because customers are not only paying the cover charge, but in some cases instead of removing the cover charge, they are removing the service charge as well. So I'm worried that in the long run, that's going to affect the amount of service fees we receive. ”
Harrods said: “Like many restaurants in the UK that provide a high level of service, it is standard to include a cover charge. We keep our prices as competitive as possible while maintaining the highest level of service to our customers. I would like to maintain it.
“The cover charge supports our restaurants to provide the premium environment they are known for during peak business hours. Since January 2022, I have been paying 100% of all service fees to my colleagues.”
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It is understood that the imposition of a cover charge does not affect service charge payments at this time.
Under the new law, which took effect in October, companies must cover all tips and service charges for employees working in restaurants, hotels, hair salons and other industries such as minicabs. The rules say tips and service charges must be distributed in a “fair and transparent” manner among employees at a given establishment.
The law was introduced after it was revealed that many businesses were using card-based fees to support profits rather than compensate waitstaff and chefs.
Instead of passing on service fees, chain stores such as the luxury brand Ivy Collection have increased employees' hourly wages by a set amount, giving senior staff a larger share of whatever is collected during their working hours. Some large chains have been found to continue to hand over much higher service fees to senior staff than others.
