Monthly Specials: What Service Staff Feel About Service Charge

Service charge, Mumbai

Photo via Wikipedia.

About five years ago, mid-level and upscale restaurants introduced a five to 15 per cent service charge on the menu prices on their bills. After an initial period of confusion and debate, diners got accustomed to paying this amount, and waiters got used to getting almost no additional tips. Last week, the government said that costumers can refuse to pay the charge if they aren’t satisfied with the service. Legally, customers have always had this option but now the government has asked restaurants to make this explicit by putting some sort of display stating that service charge is optional.

Since the news came out, there has been furious debate over the fairness of this move. Scores of articles have quoted restaurateurs and industry bodies talking about how the levying of the service charge should be at the restaurant’s discretion and that customers who don’t wish to pay it can choose to not give them their business.

The main grouse of diners is having to pay service charge even when they have suffered poor service. Restaurateurs counter that the difference between a tip and a service charge is that a tip is a reward given to one person by a diner for good service, while a service charge is distributed among all the employees who are stakeholders in the restaurant’s success. One waiter’s poor skill or attitude should not affect all the other people who made your dining experience otherwise pleasant.

On the flip side, customers feel like they’re being made to pay a component of the staff’s salary, which is the owner’s responsibility. A handful of mid-level establishments such as the Doolally Taproom chain of brewpubs and quick service restaurant chain Kaboom agree with this argument and don’t levy a service charge. “We think that service is an assumed component, it is part of the product,” said Sandeep Suryawanshi, the operations manager of new launches. “Salary is renumeration for good service.” He added that since Kaboom opened in November 2014, not a single employee has complained about the absence of a service charge. Suketu Talekar, co-founder of Doolally, said their decision to not apply a service charge was to ensure transparency. He wants his diners to be able to calculate their total bills themselves, by simply adding numbers on the menu, which include all taxes.

A few restaurants might decide to follow the lead of Colaba restaurant The Table which in April 2016 decided to eliminate service charge by increasing the prices on the menu. In a press release issued at the time, the owners said, “Guests are now at liberty to tip based solely on their dining experience (and these tips will continue to be pooled and shared with all the staff). With this restructuring, while menu prices will increase to compensate the staff for what was previously covered by the service charge, overall guests should not expect to pay any more than they are currently paying.” The Table notably is a high-end restaurant. By keeping service charge component separate from menu prices, a restaurant appears to be more affordable, which is a big factor for most mid-level establishments that draw a price-sensitive crowd.

As a best practice, the money generated from service charge is divided between back-of-house staff such as chefs, line cooks, dishwashers and cleaners and front-of-house staff like managers, waiters, bartenders, doormen and valets. A portion is put aside for exigencies, like paying for broken crystal instead of cutting it from the pay of the employee responsible for the damage. Quite obviously, it’s their lives that will be most greatly affected by the government’s order. Accordingly to most of them, service charge is a necessity because the majority of diners are terrible tippers.

“I’ve been working in coffee shops and cafes for 12 years,” said Navneet Gohil, the manager of Le15 Cafe in Colaba. “Before service charge was implemented, about 15 out of every hundred customers would leave more than Rs100 as the tip. After dividing it up among 20 employees at the end of the day, each of us would get only about Rs50.” Most of the table staff I spoke to echoed his thoughts. Servers told me that the majority of customers typically leave behind the small change left after paying the bill. After demonetisation, diners have even been picking up coins. At Kaboom, on the other hand, four out of ten people will offer a tip to the staff, said Suryawanshi. The amount is not significant so it isn’t distributed among the staff but is used for a small celebration for the employees every Saturday night after closing.

For Subhash Shirke, the executive chef at Neighbourhood Hospitality that owns the Woodside Inn chain of bars and Kala Ghoda cafe The Pantry, the amount of money he receives through service charge at the end of the month helps him run his household. “I include that extra money in my family budget,” said Shirke. “Salary is a fixed package but service charge changes through the year. In November and December, when the restaurant business does well, it’s an incentive for us employees to go the extra mile. We feel, ‘restaurant achha chalega, to humara achha chalega’ (if the restaurant does well, we will also do well).”

Each member of the staff gets a different percentage of the pool depending on their seniority and salary level. The lower the salary, the more it matters. “After it became part of the bill, for junior staff, sometimes the income from service charge is more than half the salary package,” said Daigo Gomes who manages housekeeping at Salt Water Cafe in Bandra.

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  • I don’t agree that it is the employee’s lives that will most be affected by the government’s order. To clarify, removing service charge and adding it in the menu price does not mean the staff no longer receive an amount equivalent to the service charge they used to receive previously. It is simply calculated differently because it is reflected on the bill differently. Staff should have nothing to worry about on that front if a restaurant decides to absorb it in the menu price. Furthermore, our experience from the last nine months shows that guests continue to tip, not necessarily 10%, but generously enough.

    I think those affected the most by this order will be restaurateurs who want their restaurant to appear to be more affordable.

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