Gaucho faces backlash over cuts to waiters’ service charge

The Argentinian-inspired steakhouse group Gaucho has become the centre of a tipping controversy after reports revealed that the restaurant chain has significantly reduced waiters’ shares of the service charge, prompting a heated debate about fairness and transparency within the hospitality industry.

According to documents seen by multiple outlets, including The Guardian, existing waiting staff were informed that, from 1 October, their share of the service charge would fall to between 25.45% and 29.4%, depending on length of service — down from 37% previously and a sharp decline from 45% early last year. Bar staff will now receive 17%, reduced from 20%  .

For newly hired waiters, the figure drops further to 17%, raising concerns that all waiting staff may soon be moved to the lower rate. Letters from WMT Troncmaster, the independent body managing Gaucho’s service charge scheme (known as a “tronc”), indicated that funds would also be shared with “staff located at non-public places of business such as head office and central production units,” alongside agency staff not directly employed by the restaurant group.

This revelation drew swift criticism from some employees and industry observers, who argued the move undermines the spirit of the Employment (Allocation of Tips) Act, which requires businesses to distribute 100% of tips and service charges “fairly and transparently” among workers at the venue. The law came into force in October 2024 and was designed to prevent employers from redirecting gratuities to offset payroll costs.

Bryan Simpson, national lead for hospitality at the Unite union, described Gaucho’s revised structure as “not fair or transparent”, suggesting it may conflict with the government-backed code of practice. He warned that some staff in “the most expensive city in the world” could now be earning as little as 28% of the tips left on their tables, with the remainder allocated elsewhere .

Waiters speaking anonymously to The Guardian described the impact as “financially devastating,” estimating monthly losses of £300–£600, with one employee calling it “the nail in the coffin” after earlier cuts to benefits such as free meals and drinks.

Following widespread backlash, Gaucho moved to clarify its position, denying claims that head office staff would receive a share of the service charge. In statements to The Caterer, the company insisted that no central or administrative employees benefit from the tronc, stating the redistribution “takes into consideration all front and back of house colleagues” — such as chefs, receptionists, and kitchen assistants — and is intended to be “an equitable solution for all of our excellent people”.

The group maintained that the employee costs borne by the business remain unchanged, asserting that the company itself gains no financial benefit from the policy. It also emphasised that the changes followed “industry benchmarking” and feedback gathered from exit interviews across the business.

Gaucho, part of the Rare Restaurants group owned by Investec Bank and SC Lowy, operates 20 sites across the UK, most of them in London. Its leadership, under Baton Berisha—formerly of The Ivy Collection—has previously faced scrutiny over tipping structures at other high-profile restaurant groups.

The hospitality sector has long grappled with the issue of tip distribution. While the tronc system — a legally recognised mechanism for managing pooled service charges — is widely used, its opacity has often caused friction between front-line staff and management.

Supporters of Gaucho’s model argue that sharing the tronc more broadly reflects the “whole dining experience”, recognising the behind-the-scenes roles that contribute to service quality. Detractors, however, view the move as a erosion of front-line pay under the guise of fairness.

The incident has reignited calls for tighter enforcement of tipping legislation and greater transparency across the industry. With service charges often making up a substantial portion of hospitality workers’ income, critics argue that any reduction — however justified on paper — risks alienating the very people who deliver the customer experience.

As the debate continues, Gaucho’s handling of the issue may well become a defining test case for how employers balance equity, legality, and perception in an era of increasing scrutiny over workplace fairness.