So what is the 15% “service charge” she mentions in the London restaurants? Is that a tip going to all service staff, FOH and BOH?
Interesting question. Bloomberg says that in the UK, some restaurants are adding both a “service charge” (15% of the bill, sometimes mandatory) and a “cover charge” (£2 per person) to the bill. A cover charge always goes to the restaurant, supposedly to cover the cost of serving diners, washing napkins, and the cost of bread and water. The difference between a service charge and a tip or gratuity is the former appears on the bill, while the latter is ‘uncalled for and spontaneous’.
whether all of the service charge goes to employees is a gray area. The money can be directed in multiple ways: It can be paid directly to servers; it can be split among all the wait and kitchen staff; or it might be retained partly or entirely by the restaurant. According to a 2021 UK government report, research showed that many businesses “that add a discretionary service charge onto customer’s bills are keeping part or all of these service charges, instead of passing them onto staff.”
Discretionary service charges, technically voluntary, are not subject to VAT, while if they increased the cost of a meal by 15% then the customers would contribute more in taxes as well.
Yes and no.
Yes, that it is the tip and nothing further is required from the customer. It’s a sort of typically British compromise between old fashioned tipping and the more European restaurant culture where service is included in the menu price. Think of it as very much like the American “auto gratuity” that’s often added for larger groups of diners.
But, no, it doesnt necessarily go to all service staff. That would depend on the individual arrangements a business has with its employees. Sometimes, it will just be FoH. Other times, it will be all staff. And it’s legitimate for an operation to have different arrangements depending on whether the charge is paid by card or cash (as happens with places that still have old fashioned tipping). For example, I know of a couple of places local to me (in northwest England) where payments in cash are divided only between FoH, while card payments are divided between all staff. Service is much more a team effort, so I think it is increasingly rare that an individual server would keep the entirety of an tip or service charge paid by of “their” tables.
The increasing popularity (with restaurants) of service charge has, I believe, a direct link with the decline in old fashioned cash tipping. A recent survey has shown that tipping has been in rapid decline over the last decade, only about 30% of customers now tipping and the practice has all but died out amongst the under-30s. I mentioned this to the owner of a restaurant we regularly visit and he reckoned it was accurate. A service charge added to the bill is discretionary but a much higher proportion of customers will pay it. Of course, it’s easier to simply not pay a cash tip, than ask for the service charge to be removed from your bill. Restaurants know that customers will not want the hassle of potentially being asked why they want it removed and will just pay it.
Tex mentions a “cover charge”. Whilst I’ve often seen this in Spain, usually covering the cost of bread and so on, I’ve never seen it in the UK. It’s another restaurant dodge to make the cost of a meal superficially look cheaper than it is actually going to be.
Interesting. Thank you for posting this point of view.
Excellent explanation, @Harters . Thanks!