Hospitality glossary · Money and margin
A service charge is an amount the business adds to a customer's bill on top of the price of the food and drink, usually 10% or 12.5%.
In practice
Definitions are easy. What matters is how the thing behaves in a real operation, and where it tends to go wrong.
A discretionary charge can be removed at the customer's request; a mandatory one cannot, and is treated as part of the sale for VAT. Since October 2024, UK employers must pass tips and service charge on to workers in full and allocate them fairly, and must keep a written policy that staff can actually see. Distribution is often handled through a tronc.
Treating the written policy as a compliance chore. Staff read it as a statement of whether the business deals straight with them, and a vague one does more damage to trust across a team than the money involved would ever justify.
Questions
Something here that doesn’t match what you’re seeing in your own business? That is usually worth a conversation rather than another article.
A service charge is an amount the business adds to a customer's bill on top of the price of the food and drink, usually 10% or 12.5%. A discretionary charge can be removed at the customer's request; a mandatory one cannot, and is treated as part of the sale for VAT. Since October 2024, UK employers must pass tips and service charge on to workers in full and allocate them fairly, and must keep a written policy that staff can actually see. Distribution is often handled through a tronc.
Treating the written policy as a compliance chore. Staff read it as a statement of whether the business deals straight with them, and a vague one does more damage to trust across a team than the money involved would ever justify.
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