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Feb 3, 2009 07:00 AM

the 12.5% service charge

I've recently returned to the UK after a long stint down under, and the 12.5% 'optional' service charge seems everywhere I have been or am going to.

What's the rationale for it? Why 12.5%? And why is it said to be optional? - if I get served, I really have to pay it. No-one describes their food prices as optional, but if I have a crap piece of meat I won't pay for that either.

I realise this is turning into a bit of a rant, but I really would be grateful if someone could illuminate me as to where it all came from and when it started.

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  1. It is a national insurance loophole. If the charge is discretionary the employees pay tax on it, but the employer avoids the NI contribution. Thus it actually cuts restaurant costs. Most charges are paid to staff via a "tronic system" where a nominated individual (not the employer) divides up the proceeds.

    Lots of mis-informed controversy about it in the national press recently. Many companies pay fixed wages which are lower than the national minimum wage and then use the service charge to make them up to a legal wage (or higher). If they didn't do this then their costs would rise as they would pay NI (11%) on this part. The government is going to do something....I bet that means a higher tax take, higher prices, but no change to take home pay for catering staff.

    Those are the facts. But I agree a big irritation, as a "non-tipping aussie" I always forget the price you see on the menu is not the price you pay. The biggest "rip-off" is hotel/restaurant bars. We had drinks at The Connaught and Maze prior to dinner at Corrigans on Saturday: £24 for two glasses of wine became £27, and £31.50 for three glasses at Maze became £35.44. When a glass of wine is this expensive to start with the service charge is a disgrace.

    2 Replies
    1. re: PhilD

      'as a "non-tipping aussie" I always forget the price you see on the menu is not the price you pay'


      Ha ha... As a 'tipping American' I think the 12.5% is a bargain!

      Actually, I am famously bad at tipping. I know many people prefer to opt out of the service charge and instead leave a cash tip for their server. I'm almost happier to pay the service charge just to avoid any complicated math or dividing among friends. I still grumble about the tipping culture - I never get tipped at work and the places where a tip is expected seem so arbitrary to me. But before I get flamed, I know the reasons behind tipping and do my best to reward good service. I just kinda hate rewarding average service to make up for cheapskate bosses who refuse to pay servers well. I do it, but I can't say I enjoy it. Common - and divisive - theme on these boards...

      1. re: PhilD

        In Canada, people who serve alcohol receive a minimum wage LOWER than the standard minimum wage by LAW. (Restaurants are free to pay more, of course, but most do not.) The rationale is the people are going to make much more than the difference in their tips, which was always true in my case. In fact, I usually made a multiple of the minimum wage each hour just in tips; my bi-weekly paycheque was just a bonus.

      2. No, it is optional. Ask them to take it off and they will, I always do this and choose to pay any tip in cash, anywhere from 10-15%. As PhilD noted, there has been controversy about the "tronic system" and on a number of boards it was commented on by servers that cash tips get split at the end of the night and they don't have to wait. Whether the cash method is better, I don't know, but no one has complained to me yet.

        3 Replies
        1. re: nanette

          The "tronc" is usually used for all tips thus cash tips will go into it as well.

          The controversy wasn't around the tronc system, it was the scandal that employers were paying below the minimum wage. What seemed to be missed by most commentators and correspondents to blogs was that the wages plus the tronc allocation usually resulted in earnings that were a lot higher than the minimum wage.

          1. re: PhilD

            Hrm. I remember an article in the Guardian that claimed they got the cash at the end of the night, and the tronc tips were used to "top up" wages and comments seemed to support this. I don't know that there is any truth out there.

            Chow Police seem to be back to mainstreaming. Cheers.

            1. re: nanette

              It's more the separateness of the charge, though Phil's explanation makes sense re tax. I do understand it is, technically, optional but it would be socially very difficult to refuse and I don't think service is an unreasonable charge. The whole of France seems to be able to cope with including it in base prices.

              (I originally posted it in the UK as it seems to be expensive London restaurants who are the main culprits)

              The other innovation at michelin restaurants seems to be putting the prices in words with an odd mix of capitalisation, I would have thought most of their customers were numerate.

        2. Since I reside in the US, I rather look upon this as part of the "tip." For really good service, I'll up the ante. I think that PhilD nailed down the particulars well.

          What I have a problem with in the UK (London in particular), is the "cover charge," of an additional £ 5-10/person, to dine at many restaurants. There is no floor show, no music, no magician plying his trade amongst the tables, just an extra charge for the privilege of dining in those establishments. This is something that I can rail against.

          One by one, each of these restaurants has been removed from my list - personal dining, business dining and board dinners.


          7 Replies
          1. re: Bill Hunt

            Being a regular asiahound I understand the cover charge concept. Depending on views, it either covers the nuts and towels, or is a tax on westerners. It annoys me a bit.

            What annoys me in London is the trivial cover charge at expensive restaurants. Take Corrigans for instance - a restaurant in Mayfair with michelin pricing - who charge a GBP1.50 cover charge. In a restaurant where most bills will be around GBP75-100!

            1. re: mr_gimlet

              In my cases, most were within the umbrella of a single restaurant corporation - or should I say "restaurant concept corporation." The average fare for a party of two was £ 200, including wines. In my case, though it was just an additional US$20 ± per person surcharge. Still, the principle really bothered me - to the degree that I will not hold any of my board dinners at any of the restaurants beneath this "umbrella." There are just too many great restaurnats in the UK, and London/Mayfair to choose from. These folk got my paltry US$20/person, but forever lost a client. We dine about 2 dozen times per year there, and host board dinners of 10-30, twice per year.

              I appreciate you listing another, that shall be off my list. Will be interested in seeing how things change, as the world's economies are taking hits from all sides. Still, I'd rather give MY £'s to the "good guys."

              Thanks for the clarifications and information.

              I, too, wonder why this was split off from the UK/Ireland board, as that is where, and only where, it applies. Oh well, at least we found it here, so no harm, no foul.


              1. re: mr_gimlet

                Is the "cover charge" just another loony London loophole? Like the "membership" requirement for a 24-hr license. Some way of getting a different liquor permit or better operating hours or something?

                That's the only way a £1.50 charge would make sense at a Michelin.

                1. re: copyrighter

                  Good question - I don't know. Maybe I'll ask when I'm next at one.

              2. re: Bill Hunt

                Some Lebanese places use the cover charge for bread and the raw vegetable basket.

                1. re: limster

                  Very much as I see it levied in Spain. In the UK, I don't understand it. Maybe it's a London thing as I havnt seen it elsewhere.

                  Returning to the original point, I do not like tipping or a service charge. I see it as demeaning to the staff and demeaning to the customer. The sooner it is incorporated into menu price, the better. This is our only industry where there's an expectation that we pay separately for someone to sell us something and then deliver it. Rant ends......

                2. re: Bill Hunt

                  Hi Bill,

                  I'm not sure what type of establishment you are talking about, but there are no proper restaurants in london charging £10 cover charges.

                  if you are talking about other sorts of places, jazz clubs or what have you, that might (?) be different, but no restaurant per se charges these amounts.

                  some places charge 1.50 - 2.00 and that usually includes bread and water.

                  which places did you find these higher charge at?