SF Healthy surcharge?
How common is this? We had dinner and I saw this additional charge tagged onto the bill.
The bill was $130 - the SF Healthy surcharge was about $5.20. I've never heard of this before. The waitress explained it was to cover the mandated health insurance for staff.
Although I understand the cause, I think it should be mentioned up front and not a surprise when the bill comes.
I think some restaurants have added the surcharge onto the bill as a point to let people know they're being "stuck" and now "you should feel some of our pain and see... you don't like this either."
I don't know why restaurants just don't factor the health care costs into the menu. I don't think anyone would blame them for the increases and would understand employees need coverage and the restaurant biz is risky.
Most customers aren't going to notice or care about 5-10% if it's hidden. OTOH, no one likes to see an extra amount there and have to ask. Placing the surcharge on the bill and not factoring it in seems rude, and actually a bit ironic and lame if the waitstaff has to explain it.
No one likes to be played, esp. if you're dropping $150 or so.
I hate this surcharge. I believe that employees should have health insurance and I also think that it is up to the employer to provide it. That should be part of the cost of doing business and how they need to raise those funds is up to them. I already pay for my own health insurance and don't feel it is my responsibilty to subsidize insurance for anyone else. I realize that restaurant owners could hide the surcharge via higher prices and I would actually prefer this. At least that way, I have the option of going to a different restaurant if I feel the prices are too high and I am not left with the feeling that my pocket is being picked.
It's increasingly common. The tax is only imposed on restaurants with 20 or more employees, and is higher for restaurants with 40 or more, so factoring the cost into the prices would put larger restaurants at a competitive disadvantage relative to smaller restaurants.
I've never seen it on a bill where it wasn't mentioned on the menu.
Thanks for your replies. I agree, I empathize about everybody needing health insurance, but I want to know up front. It's too late after I've eaten my meal and the bill is slipped under my nose to sign - at that point there's no going back. This was especially annoying since it was a very expensive restaurant.
Is this a recent thing and is it legal?
It is NOT a tax! It is a requirement that the health insurance be provided or that the employer pay into the city plan if they don't want to provide it, but it is up to the restaurant to decide how to pay for it: they can raise prices, use a surcharge, eat it since they don't want to raise prices, or some combination thereof.
re: Robert Lauriston
NO, sorry, you have not read all the fine print. It is NOT a payroll tax, city or otherwise. It IS a cost of doing business in San Francisco.
The amounts you are quoting is the amount per covered employee that the covered employer is required to pay for health care expenditures. It is up to the employer whether or not they pay that amount for health insurance, or pay into the City plan, or choose one of several other listed alternatives (including, if they wish to do so, direct reimbursement of health care costs employees incur). (If you read the law, there is a lengthy description of what does and does not qualify as a health care expenditure).
Therefore, since it is NOT a payroll tax and the city is not required to collect it as such, it is not like a sales tax that must be collected on every bill, which was my point. It is up to the employer (restaurant, or whoever) to decide how to fund that cost of doing business.
Under those circumstances, if the restaurant does not warn in advance (normally by a notation on the menu) that they have CHOSEN to use a surcharge to get the money to pay for this cost of business, I would encourage the patron to request that the charge be removed from their bill, or refuse to pay for it. (though my guess is that in this instance it was on the menu and the patron just didn't notice).
re: Robert Lauriston
the reason it is not effectively a tax is that there is nothing that requires the employer to pay anything to the government, city or otherwise. A tax is a fee paid to the government.
In this case, if the employer were already providing health insurance at the required rates or higher, they are required to pay absolutely nothing to the city (nor anything above their current costs.)
Of course, unlike many other types of employers, restaurants have traditionally never provided health insurance to their employees, which is of course why the bill is a thorn in their sides, but has not been a major concern for SF employers in industries such as banking or education (just to give a few examples) where health insurance is traditionally provided as a benefit to employees, and is commonly recognized as a cost of doing business.
Sure, it's a cost of doing business, but the only other costs that are mandated by the government and based directly on the number of hours worked are taxes.
So from the perspective of a restaurant owner paying the SF minimum wage of $9.36, it's effectively a city payroll tax of 11.3 or 17.1%.
re: Robert Lauriston
a perspective that is based on the assumption that minimum wage was being offered with no health insurance whatsoever. If they were already providing health insurance, they aren't impacted by this law.
Most coverage would cost more than the $1.60 maximum per hour of payroll imposed under this law. Example: my most recent employer's cost to provide me with coverage, per the COBRA notice I got when I left employment, was $435 per month for me alone (for simplicity, I am excluding my husband). ( am assuming the figure they provided me is a true, correct figure, since they are required to provide it to me under federal law. )
The average full time worker works about 173 hours per month. That means that as a full time worker the cost for my health insurance to my employer for me was approximately $2.51 for every hour I worked. My employer would have SAVED almost a dollar an hour for every hour I worked by buying into the city plan instead of choosing to cover me.
Of course, I didn't work in an industry where it was the norm to only pay minimum wage, and not to provide any benefits, so my employer would obviously not have been able to attract employees if they had chosen to do so. The industries that have been hurt by this law are the ones that pay minimum wage or little better than minimum wage, and no insurance. If you are saying it is a 'tax' on employers that don't pay a liviing wage and provide for health care for our servers and cooks, fine, I will go along with your perspective on that....
re: Robert Lauriston
Gotta disagree with you. Minimum wage is an employer's cost that's mandated by the government and based directly on the number of hours worked. And nobody claims that the minimum wage laws impose a tax.
It would be fair to say that the ordinance effectively increases the minimum wage by over a buck an hour. But to call it a tax is, IMHO, simply incorrect.
Actually, it would have been a tax savings for my employer to opt into paying the city rather than providing me with the insurance they did, which was more expensive (see my reply above).
They can't do business in the City if they don't pay rent either (unless they are fortunate enough to own the building). Does that make rent a tax?
If they were already providing health insurance, this 'tax' probably has little or no impact.
i thought about this for a bit and i'm going to come down on it is a tax
[which was my first inclination].
specifically it is an *indirect tax* on a specific action: that of hiring
an employee not covered by a health care plan.
i dont think rent is a good example ... although property tax might be.
how about this example: if a resto buys a car for the business, there
is an indirect tax on that "activity" too. now they can avoid that too
by renting a car.
in this case there is actually a transfer of $$$ to the govt. now if
say the city passed a law requiring some special air filtration
system for a BBQ or bakery, where there is no real choice to either
do this privately or have the city come out and install the system
i would personally still call that a tax. i think taxes can either be for
generating revenue or as a way of conditioning behavior.
so i think of taxes in the broad sense of regulations that change
the cost of doing business. as opposed to 'sources of govt revenue".
e.g. a gas station in CA being required to provide compressed air
is a tax. see e.g.
i am not going to do this, but frankly i'd be tempted to leave a little card
saying "tip reduced by half of health care surcharge". ultimately who cares
if we call it a tax or not. the interesting question is how this changes
money flows, i.e. is there a windfall, what is the distribution of the
windfall etc ... same issue in that incanto fellow's discussion of the
increase in min wage without a tip credit and the FOH vs BOH disparate
impact. [see also "flypaper theory of tax incidence"].
but see, you are just plain incorrect when you say there is a transfer of money to the government! There isn't, unless the restaurant chooses that from among many options. It is like rent: your landlord could be the City or another government entity, in which case your check would be made out to the City, but it could also be an individual or company. In this case of providing the health services under the SF law, the check could be written to the employee, to a physician provider group, or an insurance company. or to the City.
That is exactly why I say it is a 'tax' only on those companies that choose not to provide any sort of health care for their employees.
I'd like to know about windfall revenue too: since the restaurant is charging on a percentage of bills paid, but the obligation is based on payroll hours, there is no way to know if there is any correlation. It could be that the cost to the restaurant is x amount, but the amount being collected is Y, no way to know how they correlate. The only thing we know for sure: if the restaurant was already providing health insurance, it is quite likely that they were paying more than 1.06 to 1.60 per hour for health insurance for employees for whom it was provided, and in that case any money they collect is gravy that stays in their pocket (and they DON"T need to give to the government).
If I wasnt clear:
You can either think of a tax as sources of govt revenue, either
"direct or indirect" OR you can think of them as regulations which
increase the cost of doing business, regardless of where the
revenue goes. If the govt says "pharmacies must put a neon sign
above their doorway" and they dont care if the owner makes it in
their garage or buy one from a private supplier, for a certain
kind of analysis, it's reasonable to think of as a tax. [i suppose
there are things that would increase the cost of doing business
that i wouldnt call a tax ... like maybe some kind of takings, but
that in part because it is usually against an individual party
rather than general policy]. i suppose i wouldnt call an increase
in the bay bridge toll a tax ... that feels more like a service purchased
from the govt, so i would call it a USE FEE. but since this is about a
PUBLIC POLICY GOAL i would call it a TAX.
>That is exactly why I say it is a 'tax' only on those companies
>that choose not to provide any sort of health care for their >employees.
yes, that is why i carefully wrote "it is a tax on a certain behavior"
... specifically the action of hiring an employee who is not
covered by an adequate health care plan.
We can call it a tax. We can call it a tariff. We can call it a surcharge. We can call it a cost of doing business. The bottom line is that someone will need to pay for it. It might come from the profits of mom-n-pop, who are in the restaurant business, scraping by and hoping to put a few $ aside for retirement, or from the stockholders of a restaurant corporation. In the end, someone will pay for this, and other programs. In that end, it will be the consumers. The best that we can hope for is that these charges go toward the betterment of mankind. Whether this will happen is not something to discuss on CH. After all, we are here to talk about food, wine, restaurants and their ilk.
re: Bill Hunt
re: "We can call it a tax" vs "someone will pay for this" ...
as i wrote above, the interesting question is not the name
but the question of change in behavior and "incidence" ...
>ultimately who cares if we call it a tax or not. the interesting
>question is how this changes money flows, i.e. is there a
>windfall, what is the distribution of the windfall etc ... same
>issue in that incanto fellow's discussion of the
>increase in min wage without a tip credit and the FOH vs BOH
>disparate impact. [see also "flypaper theory of tax incidence"].
>In that end, it will be the consumers
you have not shown that. see again "fly paper theory" for an
opening of this discussion.
conclusion: the economy is getting worse here, as it is in a lot of places.
Since the law was in effect in January, and since you dont know what sectors are having the greatest increases in unemployment, (ie they could have been sectors that were already providing health insurance and thus were not impacted at all by this law) you cannot factually correlate rise in unemployment with this law. or any other law for that matter.
Of course, anyone can draw any sort of conclusion they want to about any thing, whether or not it has any base in logic or fact.
In what month did this requirement go into effect?
Not that it would matter much. The national unemployment rate for 7/08 was also 5.7%. What might be more telling would be a comparison of changing unemployment rates over the last year between San Francisco and neighboring municipalities/counties such as Oakland, Santa Clara, Marin, etc.
Getting to this heated debate kind of late, but to me, this just smacks of manipulative whining by restaurant management and will likely result in nothing but angering the customers.
If you as a restaurant owner don't like the law either move your business to another city or state, go into a different type of business, adjust your business model to compensate for the additional expenses, (as you would any other increase in the cost of doing business, whether that is by charging more for your food or cutting staff or finding a less expensive supplier or a combination of those things), and work to change the law you don't like by writing to your congressional representatives, senators, or whomever else is involved in passing these laws. If you are unsuccessful in having the law change back to what it was, either adjust to the new cost or find another type of business to be in (and incidentally, in nearly all other types of business, you will have to provide health care coverage or you won't get many employees). Why restaurants feel they should be the lone exception to a standard benefit that most other types of jobs get, I just don't know. Yes it might be a difficult, belt-tightening adjustment to make, but whining about it by pointing it out to every one of your customers is going to do nothing but leave a bad taste in the customer's mouth IMO.
The restaurant industry is one of many that do not generally provide health insurance benefits to their employees. Only 59% of Americans are covered by employer health plans.
This law was passed by the San Francisco Board of Supervisors. It applies to all businesses in SF with 20 or more employees.
Drew Nieporent closed his San Francisco restaurant, Rubicon, in part because of the extra costs imposed by this law (though also in part because San Franciscans won't put up with wine markups as high as he gets away with in Manhattan).
re: Robert Lauriston
yes, you are correct that it isn't just the restaurant industry: most service industries typically do not provide health insurance, particularly if the workers are not unionized. Typically, the better paid the worker is, the more likely they are to have health insurance as an additional benefit on top of the pay (unless they are self employed).
As for Rubicon, I was very unimpressed my one visit there (other than with the wine list, which of course was impressive).
Plenty of restaurants in similar price ranges seem to be doing well (particularly in SF, where a strong foreign tourist industry has been offsetting domestic economic woes, at least to some extent). We only have the restaurant's word for it that it was the cost of this law that killed them (though by the way, in the article, rent is also mentioned as a major factor). If it was just the health insurance, one would wonder why they didn't raise the mark up on their food or charge a surcharge that unsuspecting Brits (and apparently more than a few Americans) will think is a tax anyway?
I'd love to see an economist do a real study of the actual costs to the industry, using a combination of modeling work, qualitative interviews, comparison of payroll costs in SF with those in the east bay, examining where unemployment claims are coming from, etc. Would be very, very interesting to see if the restaurants would be willing to share their data. Anyone at UCSF or SFState out there listening and interested? Wouldn't it be nice if we could give the policy makers some real data to make a decision on?
But the real question is: if it turns out that this law is costing restaurants in San Francisco money, what do you do about it? Reverse it and let those employees end up on the public rolls for medical care? (You don't seriously believe that just because swsidejim and cstr can afford to buy good health insurance that your average server or bus boy can, do you?) Let them go without insurance or care? Tell them that despite the fact that the restaurant can't run without them they should quit and find jobs in another industry?
Of course, I suppose a number of them might not be documented, and might not be able to get another job all that easily...so then, do you have them go back to wherever and have the restaurant close down for a lack of a workforce? (though research has shown that actually undocumented are a relatively small part of the uninsured workforce in CA, see the link below, so fortunately, this scenario is probably not a major concern)
Is having lots of variety of nice places to eat out without spending a lot of money more important than providing a safety net for the workers that serve the food, clear the plate, (or make the bed, or whatever)?
and of course, given the high number of working Americans who don't have health insurance as you note, (and that number is rising btw) and the fact that there have been studies showing that universal health care would be cheaper all the way around than our current system, I am sure all of you who are opposed to this law would favor having the government provide the care. Yeah, right.
For those who are really interested in looking at actual scientific research rather than just anectodes, here is an excellent source of information on insurance coverage in CA:
Trying to fix national problems at the local level usually has undesirable side effects, such as encouraging businesses to move to nearby cities or counties.
If they're really concerned about the employees, why exempt businesses with less than 20? I think this law was more about ambitious politicians building their resumes for eventual runs for state or national office.
It's educational for San Franciscans who elect those people to see the costs broken out on their receipts.
re: Robert Lauriston
but Robert, how is it educational if we have no way of knowing if there is any relationship between the surcharge and the actual cost?
As I said above, what we really need to make good decisions is good information. We don't have good information, we are all only speculating. I am surprised that a restaurant critic like you would take the restaurants at their word, particularly given that you are so cynical about resume building (well OF COURSE they were resume building: did you ever know of a politician who wasn't?)
My presumption is that it was indeed politically expedient to exclude small businesses because they screamed and yelled; remember that only those industries that didn't already provide insurance were impacted by this law. There are many, many, many more small businesses in the service industry, which traditionally does not provide health insurance, than in, say, corporate and financial markets, which traditionallly do.
but yes, I agree. I would LOVE for San Franciscans, and all Californians, to see the real cost of health care broken out on a receipt. but sorry, this ain't it.
p.s. Edited to have: although I have no solid data on this, I am guessing that given
a.) all the foreigh tourists I am seeing in the City enjoying the exchange rates
b) all of the break-ins that we are hearing about on the news
that restaurants in SF aren't exactly clamoring to move to Oakland right now! (much easier to just tack on a surcharge and complain about the politicians again).
re: Robert Lauriston
I agree. It becomes Newtonian: "every action has an equal and opposite reaction."
When we're pressed to sign the petitions, etc., we need to ask ourselves what the far-reaching implications might be. Yes, it sounds good, when the young person with the petition outlines their "talking points," but what does it mean - down the road - to all of us?
You may enjoy reading the study from the Institute of Indistrial Relations
at UCBerkeley when SF raised the min wage without a tip credit a couple
of years ago. I havent thought about whether the increased costs to the
owner due to min wage increase and the "health care tax" should have
different effects, but it's a starting point
[see first article].
re: R Lauriston:
>Trying to fix national problems at the local level usually has ...
well without using a word like "fix", a little case study [non-academic
]of the effects of min wage differential [posted before, but forgot what
Another comment, regarding the cost of life and healthcare (also affects restaurants to some extent). Wife runs a large hospital in AZ, not CA. She spends ~US$25M in free healthcare for people not covered otherwise, legal or otherwise. It is the cost of doing business in a responsible way. Now, AZ has far less legislation, than does CA. Still it's just part of the costs. Who has to pay? Well, I do, as I am heavily insured. The $ has to come from someplace, right? Do I resent all of those millions going to others? No, not really. I can afford to pay. Still, if the federal government gets involved, it will change, and not for the better.
How healthcare affects the restaurant business - your bill and mine, remains to be seen. How does re-engineering the earthquake threat affect everyone, who lives in, or visits CA? Well, we'll likely see.
While it does not affect my quality of life, other than that I am in SF about 12x/year, it is something that we all must question. It's nice to just think that we're charging faceless corporations to guarantee a better quality of life for all, but the costs WILL be passed along in some form. If we are doing the right thing, then we should buck-up and pay our fare. I only question who will regulate "our fare."
I wish that it was different, and everyone was rich, well-insured, healthy and prices were all fair. Unfortunately, I do not see this happening, at least not in my lifetime, or possibly yours.
I do agree that your request for some economic accounting is a good thing. I have seen mixed reports there. It seems that some are "playing the system," and some are just cashing in.
re: Bill Hunt
~~Still, if the federal government gets involved, it will change, and not for the better.~~
Gotta disagree there. The US is the only industrialized nation without universal health care. There are certainly problems with the French, Italian, British, Canadian, German, etc. systems, but if you look at availability of care and overall health outcomes, they're all doing a fair bit better than we are.
The SF initiative is a poorly-conceived attempt to address this national problem on a local level. And restaurants' tacking on of surcharges smacks of playing the system. But at least maybe it will serve to focus attention on the problem. Which is that we as a nation have not come up with a rational way to spend a reasonable amount of our GDP on health care.
Only the rich can afford health insurance unless it's paid for by an employer, and if the employers didn't have to pay so much for health insurance we'd all be a lot richer. Something's gotta give.
This will become more common, as varsious aspects of small businesses become legislated and certain programs mandated. Some will be fair about it, some will use it as a "profit center." Surcharges, of various kinds, are becoming all the more common.
Now, let us hope that these surcharges reflect, in some way, on the rising costs of doing business. I feel that this is not always the case.
Over the last several years, we have dined in London, several times per year. Because of our board members' requests, it seems that we have gone to too many of a couple of restaurant groups' establishments. These spots add a 5-10£/person "cover charge," for the privledge of dining there. Noting added. No show. No music. Basic dining and that is all. Still, for a party of 6, one is likely to have a 60£ "cover charge" added. This seems to be an expanding trend, and to date, I have yet to see it printed on any menus - only on the check. For me, it has become a bit easier, as I now make all reservations, prior to leaving the US. We just do not frequent the restaurants in these "groups." It's much easier to just say "no," to these board members. Reservations have already been made. Can't change a thing. See you there.
Too many commercial establishments (and corporations) will charge whatever they feel that they can get away with. When enough "stuck pigs" squeal, they will stop adding things to the bill, but not before.
Let's just hope that these "surcharges" are legit and are going to cover the extra costs of being in business today.
As consumers and voters, we also need to acquaint ourselves with what repercussions there might be for legislation, however good it sounds. Who will pay? Restaurants are usually not THAT profitable, unless one can sell the concept, or franchise it to others. Who pays? Is it the restauranteur, or the diners? Not totally unlike taxing corporations to a greater extent. Who pays?
Still, a 5-10£/person "cover charge," just for the pleasure of my being a patron does not sit well and I vote with my American Express card. May they rot in... ! I take 6 board members to dinner and the tab, with wine and service charge, comes to 1200£ and then there's another 60£ charge, because someone chose badly on the venue? Nah, I don't think so. Am I paying for the UK healthcare system? I thought that was covered with the VAT.
We'd better get used to some of this, as it will be similar around the US. Soon we'll be charged for reforrestation and overfishing, plus other extras. Everytime we vote for Proposition XXX, we'd better consider the monetary consequences.
Sorry to be so cynical, but maybe that's just my nature,
Excuse this out-of-town hick from Paris for reviving this old thread.
We recently dined - marvelously - at San Francisco's Delfina and noticed two things that had happened after we moved to France: (1) the mandatory service charge for parties of 6 or more. Fine. (2) the health tax (or tariff or whatever term that offends people least). FIne too. We were willing to pay those nickling&diming fees if such is the custom. And it was not the moment for us to create a fuss when we were inviting a few friends to whom we want to express our gratitude.
What dismayed us was that the 6-person-minimum service charge was added to the health tax subtotal on the bill. We were on the point of adding a tip to the grand total when a local alerted us to this sneaky practice.
No waitstaff had ever explained this curious operation.
When we asked the waitstaff if the service charge was indeed buried within the health tax, he admitted it and said it was a software glitch that could not be corrected.
I could only feel deeply sorry for any waitstaff who was trained to have to say such a thing.
And by the way, none of this was specified on the menu. Before I say this kind of practice is not worthy of a place like Delfina, may I ask fellow Americans if this practice of adding the service charge into the health tax subtotal is wide spread and is accpeted by all of you.