Restaurant service charges: for and against

There are few more emotive subjects in the restaurant industry than service charges. Whether you're someone who baulks at seeing the 12.5% charge on your bill or feels a sense of relief that you don't need a degree in calculus to add a tip, almost everyone has an opinion when the time comes to settle up.

Restaurants take one of three approaches to service charges. The first is to add a 'discretionary' charge - typically 10-15% - to the final bill, with the customer having the option of whether to pay it or not. The second is to impose a service charge only on larger tables (groups of more than six, for example) while the third is to leave any tip at the complete discretion of the diner. But which one is right?

The most common approach is the first. The principal driver for this is HMRC's rules regarding the distribution of tips to staff members. If a restaurant adds a mandatory charge it is treated as wages and tax and National Insurance contributions have to be paid on it. However, if it is discretionary is it regarded as a tip - and often shared among staff using a pooling system called 'the tronc' - and no National Insurance needs be paid. "Quite simply it's more tax-efficient for restaurant staff to receive this part of their pay through the tronc," explains Neil Gill, owner of Seasons Dining Room in London.

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Against the charge

Indeed, Seasons Dining Room doesn't impose any service charge at all. "I incorporate this cost, as with all other restaurant overheads, into the price of the food and drink," says Gill. "From the guest's perspective this allows for less bill anxiety - avoiding the whole 'should I, shouldn't I?' process."

Furthermore, Gill believes that the practice of adding a discretionary charge, and asking the diner if the service was worthy of full payment, should be scrapped completely. "In any other professional engagement it would be absurd. Asking a dentist to fix your teeth and then deciding whether they were due full payment would seem preposterous."

Others in the industry have more forthright views on charging. "It's a surcharge, not a service charge," says Mick Dore, who runs The Alexandra pub in Wimbledon. "It should be up to the customer who gets it, and how much."

Fred Sirieix, general manager at Galvin at Windows, surprisingly agrees. Despite overseeing the dining room at the Park Lane restaurant, Sirieix says customers shouldn't be charged extra for the sparkling service they receive there. "Service charge is like VAT, it goes up and down," he says. "No one really wants to pay or charge it."

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Pro the charge

Many restaurants, however, regard service charges as an important part of their business. At Roganic, in Marylebone, 12.5% is added to the final bill, although head chef Ben Spalding stresses that it is discretionary. "Waiters and chefs are paid a wage to perform their duties. Service charge should only be paid if the service is fantastic. It is up to the customer whether they pay or not."

Others believe the charge is an essential part of the industry. Barbecoa, the barbecue restaurant set up by Jamie Oliver and Adam Perry Lang, is an advocate. "We are staunchly pro-service charge as it drastically increases non-wait staff earnings," says a spokesperson. "But we are very aware that it relies on honest operators."

Tim Hayward, owner of Fitzbillies cafe and restaurant in Cambridge, currently imposes a mandatory service charge on tables of six or more, but is not against an outright charge. "We'd like to do it across the board because our punters are poor tippers and our staff are on minimum wage and tips," he says. "The problem is that the service charge is fully taxed where tronc isn't."

Mat Follas, former MasterChef winner and owner of The Wild Garlic restaurant in Beaminster, shares Hayward's sentiment. "As a business owner, it is almost impossible to operate profitably without the charge," he says. Follas doesn't currently charge for service, asserting it should be the diner's choice, but says he is about to change this policy for the good of the business.

Nor is it just restaurateurs that welcome the charge. "I breathe a sigh of relief when I get a bill with 12.5% added on," says prolific food blogger Chris Pople. "It saves me worrying about it. Dining in New York [where the customer decides what to pay] is fraught."

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Cover charge

More contentious maybe is the cover charge imposed by some restaurants, including at the newly opened restaurant The Delaunay in London's Aldwych. Here a £2 dining room charge is levied, of which Pople is less forgiving. "It's mean-spirited, counterproductive and pointless. It isn't worth annoying people," he says. "Just put 10p on everything else I order, don't add on an unavoidable cover charge."

Charlotte's Bistro in Chiswick, however, is pro the cover charge, providing it gives customers something extra. "We were one of the first restaurants in the UK to ditch tap water and offer filtered instead," says owner Alex Wrethman. "For this and fresh bread we charge £1 per head, and we give people the choice not to pay. Particularly in this time of austerity, restaurateurs have a duty to make menus and billing practices clearer.

"Our £1 cover charge works for our business model, our customers like the value for money it offers, and it means we can keep our main menu prices at a great price."

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