Ban default service charges and pre-set digital tip screens in hospitality

Prohibit hospitality businesses from automatically adding "discretionary" service charges to bills, and ban digital card readers from prompting customers with pre-set tip percentages before payment. We believe all tipping must be 100% voluntary and initiated by the customer.

In our view, the current tipping culture has become coercive and stressful as some restaurants routinely use "drip pricing," adding a 12.5% charge at the end of a meal, forcing customers to awkwardly ask to remove it. We think digital payment screens with pre-set tipping suggestions use psychological pressure to guilt people into tipping for basic counter service. We think this creates a hostile environment and anxiety for consumers.

The government does not intend to prohibit hospitality businesses from adding optional service charges to bills or offering customers pre-set tipping options.

The Digital Markets, Competition and Consumers Act 2024 (DMCCA) prohibits drip pricing practices, which is when consumers are shown an initial headline price for a product or service and then are shown additional mandatory charges as they proceed with the transaction. Furthermore, the DMCCA prohibits traders from engaging in aggressive commercial practices, including high pressure-selling techniques.

The Competition and Markets Authority has published guidance to help businesses understand and comply with their obligations under the Act. Businesses must always make it clear on the bill or in communication with the consumer whether any tip automatically added to the bill is optional or mandatory for the consumer to pay. Similarly, if a business provides pre-set tipping prompts on digital payment screens, there should be an option for consumers to choose not to tip or to choose a custom amount. If the tip is optional, there should be no pressure to agree it.

Under the Employment (Allocation of Tips) Act, all qualifying tips, gratuities and service charges must be allocated fairly and passed on in full to the workers who have earned them, rather than being retained by employers.

While the government recognises that automatic service charges and tipping prompts can leave some consumers feeling uncomfortable or under pressure to include the additional cost, we believe the protections in place are sufficient. Prohibiting hospitality businesses from using automatic or prompted charges would create an additional burden on businesses and could disadvantage employees who rely on tips. The way that a business presents tipping options to consumers is a commercial decision, as long as they comply with consumer law. The government will continue to support compliance with consumer law across all sectors.