Restaurant Service Charge Is Now Optional... But Is It Really?

Is service charge really distributed among restaurant staff as claimed by management? The Quint finds out.

Despite the recent government advisory, it’s not as easy as it sounds to opt out of your service charge. (Photo: Harsh Sahani/The Quint)

To pay or not to pay?!

By making payment of service charge discretionary, the government has created new problems and more embarrassment for the customers rather than giving them relief. A recent advisory issued by the Consumer Affairs Ministry said:

The Hotel Association of India [...] on the matter being taken up with them, observed that the service charge is completely discretionary. Should a customer be dissatisfied with the dinning experience, he/she can have it waived off. Therefore, it is deemed to be accepted voluntarily.

The advisory quoted from the The Consumer Protection Act 1986, saying that the consumer can make a complaint to the appropriate consumer forum under the Act against ‘the services hired or availed of, suffered from deficiency in any respect.’

But how does this work in practice? The Quint visited privately-owned and state-owned restaurants in Delhi to find out.

Restaurant #1

Our first stop was one of the oldest restaurants in the heart of the city, United Coffee House.

Interestingly, even before we could step inside the restaurant, we found a notice at the gate, which said:

We charge 12% service charge on food & beverages, apart from applicable taxes. When you choose to dine here, we understand that you have accepted our offer to levy such charges.

To find out more whether the restaurant has actually kept a mandatory service charge, we spoke to the manager.

Reporter: Why are you charging 12% service charge? Why haven’t you left it to the discretion of your customers?

Manager: If you are dinning here, then these are our rules. That’s why we have a notice at the entrance.

Reporter: So it’s not up to the customer?

Manager: No

Reporter: Do you distribute the service charge among your waiters?

Manager: Not just the waiters; it’s for the kitchen staff and others as well.

Reporter: If someone refuses to pay, will you waive it?

Manager: If you are dinning, it is compulsory.

Reporter: So you are ready to give up a customer rather than the service charge?

Manager: Yes, it is compulsory. We have said so on the notice.

Clearly, by making service charge payment mandatory, the restaurant is ready to give up on their customers but not on the charges. We tried to reach out to the restaurant for a response but received none so far.

According to some legal experts and the government advisory itself, the customer can file a complaint in the consumer court if s/he is forced to pay service charge.

Restaurant #2

At yet another old restaurant in Delhi, The Embassy, we found a similar notice at the entrance. This time we decided to have dinner at this restaurant instead of just talking to the manager to know whether restaurant staff are actually benefited by the mandatory charge.

Reporter: Whatever service charge we pay, do you get part of it?

Waiter: Yes, we do.

Reporter: If I don’t want to pay service charge, will your management waive it?

Waiter: No, they will not.

Reporter: What instruction have you received from management?

Waiter: We will charge customers. We have a notice at the entrance.

When contacted later, restaurant management changed its tune, saying the charge was indeed ‘discretionary’.

The plea taken by the restaurant owners for levying service charges is that it is for the welfare of its staff. But the question is, why can’t the owners take care of welfare expenses the way other service sectors do, rather than burdening their customers with that responsibility?

Restaurant #3

At ‘The Potbelly’, a privately-owned restaurant in Bihar Niwas, the staff readily waived service charge when requested to so. But here, we found that for years the service charge was being pocketed by the owner of the restaurant.

Reporter: Is the service charge distributed to the staff?

Waiter: No.

Reporter: The service charge is not given to you at all?

Waiter: No, the service charge goes to the owner.

Reporter: How long have you been working here?

Waiter: For two years.

The restaurant, however, denied the allegation when contacted. They also said that due to estranged relationship between the staff and the management, we were misinformed by the waiter.

Restaurant #4

We checked out a state-owned run canteen at the Arunachal Bhawan. We found that the canteen is still levying the charge. The cashier claimed to be unaware of the government advisory on the issue.

Reporter: Haven’t you charged 10% service charge here? The government has released a statement about it. Is this a private or state-owned canteen?

Cashier: This is a state-owned canteen.

Reporter: Aren’t you aware of the government’s statement on service charge?

Cashier: I don’t know, we haven’t received any circular yet.

The advisory on service charge has brought more embarrassment than relief to customers. Instead of making it the customers’ headache, the government should have either definitely kept, or waived the service charge. Making it discretionary leads to confusion for both patrons and staff.

For now, if you’re are not prepared to pay service charge, choose your restaurant carefully. Or you may get a nasty surprise when it’s time to pay the bill.