Whose Service Charge is it Anyway!

I remember many years ago, hospitals used to levy a 10-15% surcharge on the total bill. There was no rationale and the explanation used to be that it covered ancillary costs that could not be separately categorized. Enough people complained, and the surcharge was removed.

Restaurants have now gotten into the fray and started levying a service charge that is supposed to represent the tip or gratuity we would have otherwise hopefully paid after a good meal. It’s not that I hadn’t noticed this practice earlier, but since I am a healthy tipper anyway, I didn’t give this 8-10% service charge too much thought.

That changed last Sunday when I went to a reasonably expensive restaurant for dinner with family and there were issues with the service and the food (I returned one dish). I decided initially not to tip and then re-thought and kept a small amount. I cursorily glanced at the bill and since it seemed to be in keeping with my expectations, I didn’t go through it in detail.

When I reached home, I looked at the bill again and found the addition of a 10% service charge. Considering that I had not wanted to tip in the first place because of the poor service and food, not only had I landed up paying 10% on the total amount, I had also paid an additional amount as extra tip.  I felt like a fool and promptly shot off an email. To his credit, the local manager promptly replied the next day and then immediately escalated the issue to a more responsible person when he couldn’t answer my queries satisfactorily.  

Questions

  • Why is a service charge levied?
  • Isn’t the decision to tip or not tip that of the customer?
  • By levying a service charge, how can a restaurant decide what and how much the customer should tip?
  • Why is this non-optional? If a tip is optional, why isn’t the service charge?
  • Why do most restaurants not inform us about the service charge in advance?
  • Why is the service charge also tacked onto alcohol? If I order an expense bottle of wine, is the service any different depending on the cost of the alcohol? Why should I pay 10% service charge on any liquor?
  • Service tax and VAT are levied on the total amount inclusive of service charge. Why? Why should I bear an additional burden on the tip that I am notionally paying?
  • Who decides the amount? Why not 20%? Why not 5%?
  • Who has allowed the restaurants to do this without our permission?
  • And most importantly…how much of this really goes back to the staff?

 As a customer who often frequents restaurants, here is what I would want.

  • No service charge.
  • If it has to be levied, it must be optional.
  • Which means, the fact that it is being charged should be mentioned up front before I sit down on the table, with prominent wall or table displays, as well as on the menu and on the bill at the end.
  • There should be no service charge on liquor. Period!
  • There should be no taxes levied on the “tip”/service charge and I should have the liberty to pay the way I want. The taxes and the method of billing are not my problem, but currently I am being penalized for no fault of mine, the only fault being that I am dining at a restaurant that non-optionally tacks on a service charge.

Restaurants need to address this issue before someone files a petition or lawsuit and makes them stop this rubbish forever.

9 Comments

  • hi gd mng,thanks a lot ,its a very logical n sensible thought n there are plenty of such taxes n issues,which needs to looked n revised but people dont act n react n accept all good n bad decisions of govt!

  • M R Sundaram wrote:

    Service charges should not be a predetermined % added by restaurants like ‘Service Tax’ levy. Nor should it be confined to a frozen % if you are impressed with the quality of service rendered by the concerned waiter. I am against the (i) Compulsory levy as well as (ii) pooling of ‘service charges’ and distributing among all waiters. The ‘service charge’ (Tips) given by me is a recognition of good service of a particula person waiting on me and he should be rewarded as such!

  • Tipping seems to be standard procedure now for better or for worse. In USA it seems to be a inviolable right of the service provider! The only option is whether you are going to leave a 15% tip or 20% anything less as in 10 or 12% means you are displeased with the service!
    I agree that we should not be ‘forced’ to pay a tip like that and tip should not be more than 5% at the risk of being thought cheap!

  • P. Venkatraman wrote:

    I fully concur. But in India this malady is just starting to take roots whereas in the US it is now firmly entrenched.

    And in some ways in rather illogical ways. for example if you take the SuperShuttle in most cities to get to/from the airport, there is no service charge if the booking is for under 4 pax. But if you book for more than 4 in one booking then it is a compulsory 15%.

    Now that is almost confiscatory, I feel.

  • Pushpendra Shah wrote:

    I have always felt that this is akin to going to a shop to buy things. At the end they put on a service charge of whatever percent.

    Seriously how many people will agree to paying this ?

    I think if enough people asked before sitting down, as to whether there is a service charge or not, and if they walk out if there is a mandatory charge levied, all the restaurateurs will not levy this.

  • Tips are supposed to be supplements to the income of the waiter. what about the chefs/cooks the cleaning boys. Like you said one wonders if it even reaches the persons for whom it is intended and if does in what proportion.

  • The (real estate ) cost of each shop has gone up so exorbitantly in recent times…….restaurant has to cover it somehow by charging in some other head… its very difficult to run a small eateries now….classic case is closure of Mahabhoj Restaurant in Matunga east…But i guess , service charges will be slowly done away with….. In some Bar ,corkage charges are there , if you bring your own beverages…. but in normal food restaurant, you can not charge them like this..Bhavin has fixed the nail on their coffin !!

  • It is like paying a good tip irrespective of the quality of service or food, now that is totally unfair. If you are thoroughly disappointed with a restaurant’s service or food and u already feel that u r being cheated then u should atleast Hv the right to deny them a good tip.

  • barbeque nations have service tax on bills but there no one accepts any tips

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