Every so often the restaurant industry gets thrown off guard by a sudden change in the rules applicable to it. This week the Department of Consumer Affairs declared that the mandatory addition of a service charge on restaurant bills violates fair trade practices and should be payable at the discretion of the guest.
Usually such arbitrary changes to regulations are irksome, but this time I’m happy to say I wholeheartedly agree with the principle. At our restaurant, a casual fine dining establishment in South Mumbai, we did in fact switch to a policy of no service charge on bills in April last year. Nine months down, I can safely say that many of the criticisms raised by my colleagues in the industry are unfounded.
From a restaurateur’s perspective, one of the main concerns is that the staff wages will suddenly fall to nearly half if service charge is removed, thereby causing staff to leave. A simple understanding of maths will make it abundantly clear that this is not the case if the resulting increase in payroll costs is reflected in increased menu prices. After all, guests are not complaining that they have to pay high bills, but rather that they are given no choice but to pay a tip for good service disguised in the form of a ‘service charge’. A service charge assumes that every guest has received good service. We all know in the industry that this is not always the case, so why are we so surprised when guests are infuriated by being forced to pay for something they hadn’t necessarily received?
From the staff’s perspective, there may be a concern that if service charge is removed they won’t receive tips from guests. Staff need to be reassured that they will receive their dues as before, and tips (the real kind) received, if any, will be a bonus over and above their regular pay. This in fact should incentivise them to work for the extra tips, rather than take it for granted through a mandatory service charge (in spite of possibly mediocre service). And our experience over the last nine months has proven that guests are happier to tip when it’s a matter of choice.
(In the interest of full disclosure, diners should understand that it is an industry wide practice that all service charge and tips are pooled and shared between all the staff of a restaurant, based on a system of hierarchy. While your server may be the one you interact with and who makes your meal a pleasure, it takes more than just the one person to make your dining experience what it is.)
From the guest’s perspective, often they are unpleasantly surprised to see the amount of add-ons at the end of the bill, including VAT, service tax and service charge. These add-ons can sometimes increase the menu prices by almost 30–40 per cent. Removing even 10 per cent (the average service charge) from these add-ons and including it in the menu pricing, will undoubtedly be more transparent. Ideally, a menu should reflect all the restaurant’s costs, including taxes, where possible, so that guests don’t have any nasty surprises when they get their bill.
And finally there’s the small point of impracticality: even if guests, in theory, have the choice to ask for their service charge to be removed, the sheer embarrassment of asking, or the hassle of waiting for a revised bill, often deters them from doing so. The last thing we want in the hospitality industry, is for our guests to leave the restaurant dissatisfied in any way, so go pro-choice! It’s a guaranteed win win for all, diners, staff and restaurateurs.
The writer is co-founder of The Table
