Service charge

To tip or not to tip? When a service charge is included

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You have probably experienced it. You get the bill at a restaurant or for food delivery, and there’s a service charge attached that you didn’t anticipate. The truth is that service charges are becoming more and more common.

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Bob Patterson, CPA and founder of Patterson & Company Certified Public Accountants, specializes in the restaurant industry. He said he is seeing a significant increase in requests from restaurant customers for the addition of various service charges to avoid raising menu prices.

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While service charges can be assessed for valid reasons, sometimes they can be confusing and cause you to wonder if you should also include a tip. And when you add the service charge to other charges, like when ordering from food delivery services, your total bill can really add up.

So, should you tip or not when a service charge is included, or is a service charge equivalent to a tip? Here are the answers you are looking for.

First of all, what is a service charge?

A service fee is a fee that may be assessed to cover the actual service provided to a customer, or for administrative or processing fees related to the product or service the customer is purchasing.

Georgia Parker, project coordinator for Blue Orbit Hospitality Consulting, said there are many reasons service charges are added to checks, including when ordering from food delivery services. “Nowadays, service charges that come on top of the bill don’t contribute to the driver’s compensation,” she said. “Therefore, a consumer should definitely tip.”

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Parker also explained why a restaurant might charge service fees and how to deal with them.

“When dining at a restaurant, a service charge may be added to large parties at a varying percentage as large [parties] require a higher degree of attention to coordinate their service. Whatever percentage was added to the check, if you think more is deserved, add it. On the other hand, if you received poor service and don’t think the percentage was earned, speak to a manager, if only to take the opportunity to provide a learning experience to the personal.

But service charges are not always assessed for the same reason when dining out. Jes Taylor, one of the owners of the Sergeantsville Inn in Sergeantsville, New Jersey, provided insight into other reasons a restaurant might include a service charge.

“There is a clear difference between service charges and tips. In New Jersey, tips on catering costs can only go to ‘customer-facing’ staff – servers, busses and bartenders,” Taylor said. “Here at the Sergeantsville Inn, we’ve decided to add a 5% service charge to fund benefits that also apply to our support staff. This charge will go directly to several benefits, including offsetting health insurance costs, which for low-income workers can be very high, and providing a free daily meal, which most restaurants charge their employees.

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“We believe that the service charge allows us to reduce the wage gap between front desk and back room employees without taking money directly from service staff.”

Do service fees differ from company to company?

Yes, the service fees differ from one company to another, even when they belong to the same sector.

For example, a service charge at a bank is usually assessed to help cover the costs of managing your account, while a service charge at a hotel may cover the administrative costs associated with booking your reservation.

Does a service charge count as a tip?

According to the US federal government, “a tip is an amount presented by a customer as a gift or gratuity in recognition of a service rendered for the customer. It should be distinguished from the payment of a fee, if any, made for the service. »

In other words, in America at least, a service charge doesn’t count as a tip because it’s a charge to the customer – not something the customer voluntarily gives.

So while it is customary to tip for a product or service you receive, the general rule is to disregard any service charges that may be included. And if you have any questions about service fees, never hesitate to ask.

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About the Author

Cynthia Measom is a personal finance writer and editor with over 12 years of collective experience. His articles have appeared in MSN, AOL, Yahoo Finance, INSIDER, Houston Chronicle, The Seattle Times and The Network Journal. She attended the University of Texas at Austin and earned a Bachelor of Arts in English.