Harrods has introduced a £1 a diner “cover charge” in all its restaurants and cafes in London which staff say aims to bump up profits by up to £1m after a government crackdown on companies taking a cut of tips.
The upmarket department store, whose owners took a £180m dividend last year, charges diners a 12.5% service charge – all of which has gone to workers in the kitchens and restaurants since 2022 – and a further £1 cover charge that the business keeps.
The charges mean that a cappuccino could cost £8.31, including a £1 cover charge and 81p service charge.
The charge has emerged as more than 100 Harrods workers prepare to strike on 21, 22 and 26 December over pay and conditions, including concerns about the distribution of customer fees in the restaurants.
Workers say they fear the imposition of the cover charge – which was first trialled a year ago and is now in place at all Harrods’ London restaurants – will prompt diners to cancel paying the optional service charge, hitting their income.
They want Harrods to either cancel the cover charge or share it among workers and to be more transparent with staff about how the service charge is distributed.
Workers say Harrods is making more than £2,500 a day from the cover charge and is considering raising it to £2 a diner.
Alice Howick, a member of Harrods’ waiting staff, said: “Given that there’s no law on cover charge at the moment, we feel like it’s a loophole that the company is using to make more money as a result of inflation. They’ve also said that they’ve introduced the cover charge to protect the prices on the menu so that they don’t have to keep increasing it.
“It’s not distributed to the staff, and we feel like we’ve been hit by it, because customers will now ask to remove the service charge as well as the cover charge, or maybe sometimes instead of removing the cover charge. So, we’re worried in the long term that it’s going to affect the amount of service charge that we get.”
Harrods said: “Like many restaurants in the UK where there is a high level of service, it is standard practice to include a cover charge. We want to keep our prices as competitive as possible, while maintaining the best levels of service to our customers.
“The cover charge supports providing the premium environments our restaurants are known for during peak periods of business. Harrods has paid 100% of all service charge to colleagues since January 2022, over two years before legislation was introduced which required all restaurants to do so.”
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It is understood that, as yet, the imposition of the cover charge has not affected service charge payments.
Under new legislation implemented in October this year, companies must share all tips and service charges to those working in restaurants and hotels, and in other businesses such as hairdressers and minicabs. The rules say the tips and service charges must be distributed in a “fair and transparent” way between workers at a particular establishment.
The law was introduced after it emerged that many businesses were using card-based fees to underpin profits rather than reward wait staff and chefs.
Instead of passing on the service charge, chains including the luxury Ivy Collection chose to bump up workers’ hourly pay rate by a set amount, with senior staff taking a greater share no matter how much is collected during their working hours. It is understood that some big chains continue to hand a much larger chunk of the service charge to senior staff than others.
