American dining chain won’t have to pay tax on rise for kitchen staff if funded by redistributing waiters’ card tips

A new row over tipping has erupted at TGI Fridays, the American restaurant chain, following a proposal to redistribute card tips from waiters to kitchen staff in lieu of a wage increase. Under the change, all cash tips will continue to go to the waiter serving, but 40% of the total card tips will be given to back-of-house staff.

According to a note sent to staff, the change is due to unfilled posts and high staff turnover of chefs due to “[the] pay perception and rewards offered by our direct competitors”.

The proposal has sparked a backlash among employees. Waiting staff are angry about the loss of card tips, which the Unite union claims they were not properly consulted on. Meanwhile, kitchen staff are said to be unhappy they will not receive a wage increase when the new “national living wage” takes effect on 1 April.

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TGI Fridays is planning to give an increase of 33p an hour to waiters aged 25 and over, while skilled back-of-house staff will only receive a share of tips.

“This is a blatant case of ‘robbing Peter to pay Paul’ – waiters, kitchen staff and bartenders are all losing out,” said Unite’s regional oficer, Dave Turnbull. “The only winner is the company, which could be saving itself thousands of pounds in tax by using untaxed card tip income paid via a tronc to fund kitchen staff wages.”

Distribution of tips via a “tronc” – or pool – is not subject to national insurance, whereas a pay increase would be. The move has now been postponed until 19 February.

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One waiter, who did not wish to be named, said: “The way they’re treating us, by imposing an unfair rule on us and by misleading us about its implications, they’ve shown they’re no different to any other company out there. They’re out to save money at the expense of the lowest-paid workers who keep their business running.”

The employee said waiters could earn up to £40 in card tips in just a few hours on busy days and some might struggle financially if the proposed changes went ahead.

TGI Fridays said: “The change – which only impacts tips on card – is based on industry research and … open discussions with Fridays team members, who aided in the decision to come to the share of tips.”

“Tips are a reward that are given over and above wages, which we want to ensure are allocated to everyone who’s helped earn them – whether that’s a chef whipping up one of our famous American grill dishes, or a server treating guests to an unforgettable and unique Fridays experience,” said a spokesperson.

The company denied that the decision to award kitchen staff a bigger share of tips was for tax reasons.

The chain, which has more than 40 outlets in the UK, stressed that the company kept no tips given by customers for good service.