Opinion: Service charges

POSTED: 09/12/11 12:28 PM

Rui Bagina is on a mission to get service charges restaurants and hotels slap on top of their bills into the hands of employees. What we get from this action is that there is a gross misunderstanding about this charge – not only among employees in the hospitality industry, but also among its clientele.

First off, we go with attorney Van Sambeek’s opinion that the service charge is money that belongs to the companies, not to the employees. Waiters and waitresses get tips, and in whatever way companies want to distribute those tips is up to them. In some places all tips go into a large pot and they are distributed evenly among the employees at the end of the week. In other places it’s every waiter for himself: they get to keep the tips clients give them.

The nature of the tip is obviously that it is a voluntary contribution. Clients have no obligation to tip, and they certainly won’t do it if the service was lousy or if the food was inedible.

But what about the service charge? Restaurants routinely add 10 or 15 percent to the tab under this heading. Clients have to pay this, and many of them consider the service charge as an obligatory tip. In a way it is, but on the other hand it is simply an addition to a total that sweetens the pot for the business owner. It’s allowed, therefore it is done and nobody spends much time thinking about it.

But Rui Bagina is now stirring up this hornets’  nest by claiming that the service charge actually belongs to the employees. Van Sambeek says that there is no legal basis to justify this position.

In the meantime, clients who see a bill with a service charge, go on autopilot, or they see a legit opportunity to play Scrooge: they do not tip, or they leave less than they would usually leave, because the tip is now included in the bill.

But is it? According to Van Sambeek it is not. Tips are voluntary, service charges are not.

We agree that adding the service charge is confusing for customers. Why not increase all prices by ten or fifteen percent? So now a cup of coffee will cost $2.30 instead of $2, and a lunch of $12.95 comes now at a cost of $14.90. Make it fifteen bucks. Does anybody really care?

Nit pickers will probably argue against this approach. But this way of pricing solves two problems. It makes the real cost clear to the customer, and it takes away the notion that part of this price belongs to the employees.

As a result, clients will leave larger tips and waiters and waitresses will benefit. That way, Rui Bagina won’t have to continue his campaign to capture part the service charge for employees. It is, as we see it, a sympathetic attempt to put some extra money in the pockets of the wage-slaves in the hospitality industry, but it won’t wash in court. The best thing he may hope to achieve is an agreement about some form of profit sharing.


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