Harrods is entangled in a legal dispute over a £1 per person cover charge that isn’t paid to staff, a case that could trigger changes across a number of upscale dining spots. The rule enacted in October 2024 requires businesses to pass all tips and service charges directly to workers. Some venues, Harrods among them, levy a mandatory cover charge in addition to an optional service charge, with only the latter reaching employees.
The employment tribunal case, supported by 29 Harrods restaurant workers backed by the UVW union, is set for September. The employees contend that the cover charge effectively operates as a service charge and should be distributed to workers rather than retained by Harrods.
This marks the UK’s first test case under the Employment (Allocation of Tips) Act 2023, which mandates that all tips, gratuities, and service charges collected from customers be fairly allocated to the workers at the relevant workplace. Harrods, employing over 330 people in its dining venues, currently passes on the 12.5% optional service charge to staff but keeps the £1 per head cover charge, a policy introduced across its London restaurants and cafés before the new law took effect.
Other London eateries such as the Ivy, the Delaunay, and the Wolseley have also charged a cover fee.
Claimants argue that restaurant managers have discretion to waive the cover charge on request, effectively making it resemble a tip. Harrods denies this claim.
Alice Howick, a former Harrods waiter and one of the claimants, criticized the charge as being introduced without clear purpose or transparency. She noted that the cover charge persists even though it should benefit those who prepare and serve meals and drinks, whose work underpins the store’s profitability.
Petros Elia, UVW’s general secretary, warned that if a charge behaves like a service charge, it should be treated as such and paid transparently to wait staff and chefs. He labeled Harrods’ approach as a form of “Scrooge” behaviour given the company’s financial capacity to do right by its workers.
This legal confrontation adds to ongoing tensions over pay and conditions at Harrods’ eateries, which recently saw a strike in 2024. Harrods maintains that the compulsory cover charge aligns with practices at other high-demand luxury dining destinations and is separate from the discretionary 12.5% service charge. The store says it has directed all service charges to staff since January 2022, and that the service charge is calculated on the bill including the cover charge, ensuring staff receive a share of the cover charge as well.
A Harrods spokesperson emphasized ongoing direct dialogue with colleagues when determining pay structures and benefits. The company also pointed to its published policy documents detailing the cover charge and service charge, and noted that UVW is not a recognized union for Harrods and did not shape its policies. Harrods pledged to continue engaging with staff to keep pay and benefits industry-leading and aligned with its values and commitments.
This controversy coincides with Harrods’ broader challenges, including allegations from survivors of abuse connected to former owner Mohamed Al Fayed and the store’s related compensation scheme, which has already paid out to more than 50 women and will close submissions on 31 March after opening last March.
