Harrods faces legal action over £1-a-head dining charge not going to staff

Harrods is facing legal action over its addition of a £1-a-head cover charge to diners’ bills that does not go to workers, in a test case that could lead to changes at a string of upmarket restaurants.Legislation, which came into force in October 2024, requires business owners to hand over all tips and service charges to staff. Some restaurants, including those at Harrods, add a mandatory cover charge as well as an optional service charge and only pass on the latter to their workers.An employment tribunal case involving 29 Harrods restaurant workers backed by the United Voices of the World (UVW) union is to be heard in September. Workers argue that the cover charge functions in practice as a service charge and so should be distributed to them and not kept by Harrods.It is the first legal challenge in the UK to test what qualifies as a tip under the Employment (Allocation of Tips) Act 2023. Under the legislation, restaurants, cafes and hotels must ensure all tips, gratuities and service charges paid by customers are allocated fairly to workers in that place of work.Harrods, which employs more than 330 people in its dining establishments, hands the 12.5% optional service charge to workers but not the compulsory £1-a-head cover charge, which was introduced at all the luxury department store’s restaurants and cafes in London before the law changed.Other restaurants to levy a cover charge include the Ivy, the Delaunay and the Wolseley in central London.Workers say Harrods’ restaurant managers have discretion to remove the cover charge on request, so that it functions like a tip. Harrods denies this.Alice Howick, a former Harrods waiter and one of the claimants, said: “Harrods introduced this cover charge out of nowhere and without any transparency as to its purpose.“Whilst the cover charge still exists, it should be going towards the staff who prepare and serve the food and drinks, the quality of which guarantees that customers walk through the door and Harrods makes as much money as it does.”Petros Elia, the general secretary of UVW, said: “If Harrods has introduced a new charge that walks and talks like a service charge, then it should be treated like one, and paid fairly and transparently to waiters and chefs. Instead, we are once again seeing what can only be described as Scrooge behaviour from a company that can more than afford to do the right thing.”The case is the latest dispute over pay and conditions at Harrods eateries, which included a strike in 2024.Harrods said its compulsory cover charge was “in line with other high-demand luxury dining destinations” and “entirely separate to the discretionary 12.5% service charge”.It added that it had paid all of the service charge directly to staff since January 2022, more than two years before the Employment (Allocation of Tips) Act came into force. The service charge is calculated on the bill including the cover charge, so staff receive a 12.5% share of the cover charge.A spokesperson said: “Harrods’ approach to pay within our restaurant division is informed by ongoing, collaborative and direct dialogue with colleagues.”The company provides details of the cover charge and service charge in policy documents and said UVW was not a recognised union by Harrods and had not played a direct role in the development of its policies.“We will continue to engage directly with our colleagues on all issues related to pay and benefits, to ensure they remain industry-leading and guided by our values and colleague commitments,” the Harrods spokesperson said.The issue emerged as Harrods faced claims from 180 survivors of alleged abuse by its former owner Mohamed Al Fayed via its compensation scheme. The department store set up the scheme after dozens of women came forward with allegations of abuse by the late entrepreneur going back as far as 1977.Harrods said this month it had already paid out compensation to more than 50 women. The scheme, which was opened last March, will close to new submissions on 31 March.