A debate revolving around the levying of Service Charge by restaurants has been doing the rounds lately. It was sparked by a circular issued by the government that stated that it is now optional for customers to pay for the Service Charge. While customers seem overjoyed that they wouldn’t have to pay for the Service Charge anymore, the hospitality industry, especially the standalone restaurants is not pleased with the declaration.
Criticizing the move, Riyaaz Amlani, president of NRAI (National Restaurants Association of India) told TOI that they are following the very same Consumer Protection Act, and clearly mention the service charges levied on their menus. He said, "The act stops us from indulging in any unfair method or deceptive practice. We clearly mention the service charge we levy on our menus. We are not indulging in any unfair trade practice."
While everyone, ranging from restaurant owners to consumers has an opinion about the Service Charge becoming discretionary, there is still an uncertainty about the circular issued by the Union Government about the Service Charge being discretionary. The following table gives a clear picture about the impact of the declaration on restaurants and customers.
Restaurant Service Charge is basically an additional amount that is added to your bill in a restaurant to pay for the work of the staff who comes and serves you.
The service charge is an employee incentive. 60-70% of the service charge is distributed among the entire staff. The service charge is basically an employee incentive; a way of earning some extra income. As any insider of the restaurant industry already knows, attrition is quite high and attracting and retaining the right talent is extremely difficult. Cutting down on the service charge would come as a blow to the employees as well as the restaurant as they would have to look for other means to cover expenses.
However, some high-end restaurants have remained unfazed by the Service Charge becoming discretionary. “If customers are pleased with the service, they would be happy to pay the service charge.” Said a prominent restaurant owner based in Delhi.
Watch a lively discussion of between a popular food blogger, a renowned restaurant owner, and the founder of POSist about the Service Charge becoming discretionary here.