The law may have changed here but I think that this is actually illegal:
A spokesperson for Pizza Express said that its admin charge was to cover the cost of running a “tronc” – a standard pay arrangement used to distribute tips among staff. “We went to great lengths to set up this tronc system which is chaired by a troncmaster and run by a committee of waiters and pizzaiolos, who independently decide how tips made by electronic card payment are subsequently distributed between front and back of house restaurant team; a system run by employees for the employees,” she said.
Tips (as it used to be at least) which are distributed purely by the employees have certain advantages: they don’t pay NI or VAT. But, the flip side of this is that the company, management, cannot have any of it: it belongs to the employees.
If management is taking a slice then that money, obviously, does not belong solely to the employees. Thus it should be paying NI and VAT.
Any sensible management, seeing that wedge appearing between gross income and net for the waiting staff will therefore happily swallow the couple of percent that the credit card companies charge for tips on cards.
I left a job over this once, back in the day.