Hi, thank you for your doing this. It's an important topic and great to know your experience being on the side of the industry/ employee of the industry.
As a customer you are quite right. Times are so tough and to see a complimentary charge added - well that can come off straight away. Why can't the business pay their own staff - I'm not doing it? Nobody gives give me a tip regardless of how I do at my job!. Both valid points from the customers perspective.
I agree it shouldn't be called a service charge and I LOVE your explanation that if the charge was included in the final bill then VAT would be charged on it. I had never thought or considered that. Unfortunately though that may be the only answer as there will always be people who will remove it even just out of principle.
My personal feelings are landlords should be contributing more. Councils also!! In these current times they should be greatful that somebody wants to rent there property and run a business from there. If the property is let then the landlord isn't paying the business rates anymore so extra profit for them on top of the rental income. Councils keep whacking up charges and fees at the drop of a hat making even harder for the business owners. And don't even start me on the energy companies that again eat in to your profit margins which then makes it seem that the 'service charge' is pushed on to the customers to pay the staff. Just my thoughts and feelings as a customer but I have zero restaurant experience so possibly naive from the business side.
Talking about this though either on here, Countertalk or whereever is a great thing and can only help remove barriers for both sides.
Thank you for writing so clearly and informatively about this it is really interesting and important to know. I was aware of the tronc but didn't understand the tax and NI implications for staff, customers and the business. We need a fairer way of including variable elements of pay in salary calculations for mortgages etc. Loads of people are affected by this including doctors whose on call pay often doesn't count. One small point - in your calculation of the difference including service in the bill would make I think you have double counted VAT. If the original bill is £100 including 20% VAT then paying VAT on the service charge should just add VAT on £12.50. So an additional £2.50. I may have completely misunderstood this though - which just shows that it is complicated and hard to.work.out I guess
I think you're right that the calculations are incorrect. The final bill to the customer will always be (cost of food before VAT and service) x 1.2 x 1.125 (adding 20% for tax and 12.5% for service). The total is the same regardless of whether tax is added pre-service or post-service. But the amount of tax is higher if it's added post-service.
I'm not posting this to try and undermine the point because I have no issue with service charge (restaurants have it tough enough as it is) but the incorrect calculations will open this article up to unfair and bad-faith criticism
ah cool nice one! and my correction was also wrong haha, I assumed that if VAT was added first then service charge would apply to that total but it looks like I was wrong there!
Thanks for this - and I completely agree - the really important points made by Rav shouldn't be undermined by a miscalculation. She has illuminated the issues inherent in the current system so clearly. We need a way of remuneration staff that is fair to everyone and doesn't add more stress and cost to the hospitality industry which is already under pressure especially when the new NI has added so much hidden cost.
you are correct Amanda! Thanks for pointing this out, there is however an important distinction to point out for employers and employees when service charge is baked into menu pricing that I wasn't aware of until recently. I have amended the above so (as far as I know) it's accurate now!
So interesting - thank you for responding when you have so much on your plate. I hope you have tremendous success with Gina you deserve it - and for being a strong voice shining light for hospitality xx
Hi! Thank you for talking about this. Your previous articles informed me so much and I truly appreciate. I work as BOH and we’re normally kept oblivious from the management aspect of the business we’re part of.
As an employee I’d say it matters to me that the new legislation enforces a full distribution of service charge across staff monthly. I understand for the point of view of managers and business it was easier to keep the surplus for months like August. But that’s unfair on us. We not always work a full year in a business for many reasons. And we should be allowed to plan our own lives and have some control over our finances. If we know or are told ahead that most likely that month will not be the best, then we can plan accordingly. We can save the extra on a good month and cover our own bills in a bad month, as it happens with every other workers in other businesses. I’ve never seen restaurants keeping track of the surplus kept on a good month to a specific member of staff and then when that person leaves a few months later that extra their were meant to have added to their last pay. I’ve seen service charge surplus being used to pay staff parties and staff bonuses (not all staff/or shared randomly and with no transparency). But not everyone goes to staff parties, work for a whole year to be able to enjoy those dates and not everyone falls into the good graces of their managers to receive their generosity. I just think in this aspect it was a good thing. Also, if you worked the most busy services, was demanded many extra hours of work that impacted profoundly your private life and health, then you should be able to receive the only benefit of that.
Again, thank you so much for your and your staff work.
This is a really interesting insight, thank you Talita. I'm really intrigued to understand how the usage of 'tipjar' will play out for us at Gina. I'm hoping that it will alleviate any grey areas or confusion that is often cast over employees when it comes to tronc payments. Let's see..!
What a clear explanation - thank you. I’d never thought about service charge being subject to VAT and had forgotten that tronc isn’t pensionable, even though it’s only a year since this was all explained to me when the place I worked changed their tronc system because of the changes in legislation. Really enjoying reading your journey with Gina.
Hi Ravneet, thanks for the weekly insights, as always. We've spent a lot of time back and forth on our plans for this, greatly informed by your earlier Countertalk articles. As a yet-to-open fast-ish casual environment, but one in which we're looking to elevate things with the table service model and offer, we've been bouncing between a no-service model (our own language important on this, we have previously mislabelled as service-included) with tips and gratuities openly encouraged OR a traditional service included model. Determining between when to charge (daytime casual, evening table service) seems like another factor to confuse guests. It's really hard to locate a standard (differences between models, e.g. fine dining expectations, contribute to this, when we want to remain accessible for guests (and for them to understand what and why). Our base salary commitment is relatively high, with London Living Wage committed across all roles, and our forecast numbers support those wages/salaries (right now). Our conservative estimates on tips Tronc still increases staff salaries by a reasonable amount. There certainly seems to be a couple of wrong ways to do service charge, which we're not interested in, but lots of 'right' ways. It feels like a mood changer/worsener to know the industry just might not work without passing on a wage portion to the guest. Keen to hear of other experiences in the comments!
Great to hear from you Tom. Service charge as a topic has totally spun me out as a 'to-be' restaurant owner now having to implement a tronc policy. From what it sounds like above in your description I would suggest having an exploratory phonecall with Tipjar i've found their model so far the most transparent and useful. I hope it works seamlessly for us but you never know - i'm sure i'll write about it if it doesn't..! ha
Thank you for explaining this, as a customer I’ve always been confused about the service charge and what exactly it was for. I’d like to know, is a tip expected / appreciated on top of the service charge or just pay the service charge and that’s great?
Very concise article Rav! You lay it out exactly as it is. After 20years in the london industry. I completely agree with you. Nice one. TipJar sounds interesting…. I hope it works!
This is really helpful, most of us have no clue about the complexities involved in running a restaurant. We all want independents to thrive and survive, it's useful to know that this is part of that. One way or another we need to be prepared to pay. It's not much practical use to bemoan the loss of a favourite restaurant when we don't support them financially. I think about how tough it is when I see the cost increases in the supermarket. Restaurants get slated for increasing their prices by a fraction of this but they face increased costs too. I wrote far more than I intended to here. I appreciate the detailed explanation, thank you
Hi, thank you for your doing this. It's an important topic and great to know your experience being on the side of the industry/ employee of the industry.
As a customer you are quite right. Times are so tough and to see a complimentary charge added - well that can come off straight away. Why can't the business pay their own staff - I'm not doing it? Nobody gives give me a tip regardless of how I do at my job!. Both valid points from the customers perspective.
I agree it shouldn't be called a service charge and I LOVE your explanation that if the charge was included in the final bill then VAT would be charged on it. I had never thought or considered that. Unfortunately though that may be the only answer as there will always be people who will remove it even just out of principle.
My personal feelings are landlords should be contributing more. Councils also!! In these current times they should be greatful that somebody wants to rent there property and run a business from there. If the property is let then the landlord isn't paying the business rates anymore so extra profit for them on top of the rental income. Councils keep whacking up charges and fees at the drop of a hat making even harder for the business owners. And don't even start me on the energy companies that again eat in to your profit margins which then makes it seem that the 'service charge' is pushed on to the customers to pay the staff. Just my thoughts and feelings as a customer but I have zero restaurant experience so possibly naive from the business side.
Talking about this though either on here, Countertalk or whereever is a great thing and can only help remove barriers for both sides.
Keep up the great work 🙂
Great to hear from you John, thanks for reading!
Thank you for writing so clearly and informatively about this it is really interesting and important to know. I was aware of the tronc but didn't understand the tax and NI implications for staff, customers and the business. We need a fairer way of including variable elements of pay in salary calculations for mortgages etc. Loads of people are affected by this including doctors whose on call pay often doesn't count. One small point - in your calculation of the difference including service in the bill would make I think you have double counted VAT. If the original bill is £100 including 20% VAT then paying VAT on the service charge should just add VAT on £12.50. So an additional £2.50. I may have completely misunderstood this though - which just shows that it is complicated and hard to.work.out I guess
I think you're right that the calculations are incorrect. The final bill to the customer will always be (cost of food before VAT and service) x 1.2 x 1.125 (adding 20% for tax and 12.5% for service). The total is the same regardless of whether tax is added pre-service or post-service. But the amount of tax is higher if it's added post-service.
I'm not posting this to try and undermine the point because I have no issue with service charge (restaurants have it tough enough as it is) but the incorrect calculations will open this article up to unfair and bad-faith criticism
Thanks Sam! Corrected now (as far as i'm aware, a bad graphic made in a rush on little sleep!) Appreciate your kindness.
honestly vat is such a dumbass tax and so confusing for consumers
ah cool nice one! and my correction was also wrong haha, I assumed that if VAT was added first then service charge would apply to that total but it looks like I was wrong there!
Thanks for this - and I completely agree - the really important points made by Rav shouldn't be undermined by a miscalculation. She has illuminated the issues inherent in the current system so clearly. We need a way of remuneration staff that is fair to everyone and doesn't add more stress and cost to the hospitality industry which is already under pressure especially when the new NI has added so much hidden cost.
you are correct Amanda! Thanks for pointing this out, there is however an important distinction to point out for employers and employees when service charge is baked into menu pricing that I wasn't aware of until recently. I have amended the above so (as far as I know) it's accurate now!
So interesting - thank you for responding when you have so much on your plate. I hope you have tremendous success with Gina you deserve it - and for being a strong voice shining light for hospitality xx
Hi! Thank you for talking about this. Your previous articles informed me so much and I truly appreciate. I work as BOH and we’re normally kept oblivious from the management aspect of the business we’re part of.
As an employee I’d say it matters to me that the new legislation enforces a full distribution of service charge across staff monthly. I understand for the point of view of managers and business it was easier to keep the surplus for months like August. But that’s unfair on us. We not always work a full year in a business for many reasons. And we should be allowed to plan our own lives and have some control over our finances. If we know or are told ahead that most likely that month will not be the best, then we can plan accordingly. We can save the extra on a good month and cover our own bills in a bad month, as it happens with every other workers in other businesses. I’ve never seen restaurants keeping track of the surplus kept on a good month to a specific member of staff and then when that person leaves a few months later that extra their were meant to have added to their last pay. I’ve seen service charge surplus being used to pay staff parties and staff bonuses (not all staff/or shared randomly and with no transparency). But not everyone goes to staff parties, work for a whole year to be able to enjoy those dates and not everyone falls into the good graces of their managers to receive their generosity. I just think in this aspect it was a good thing. Also, if you worked the most busy services, was demanded many extra hours of work that impacted profoundly your private life and health, then you should be able to receive the only benefit of that.
Again, thank you so much for your and your staff work.
This is a really interesting insight, thank you Talita. I'm really intrigued to understand how the usage of 'tipjar' will play out for us at Gina. I'm hoping that it will alleviate any grey areas or confusion that is often cast over employees when it comes to tronc payments. Let's see..!
What a clear explanation - thank you. I’d never thought about service charge being subject to VAT and had forgotten that tronc isn’t pensionable, even though it’s only a year since this was all explained to me when the place I worked changed their tronc system because of the changes in legislation. Really enjoying reading your journey with Gina.
thanks Sue!
Hi Ravneet, thanks for the weekly insights, as always. We've spent a lot of time back and forth on our plans for this, greatly informed by your earlier Countertalk articles. As a yet-to-open fast-ish casual environment, but one in which we're looking to elevate things with the table service model and offer, we've been bouncing between a no-service model (our own language important on this, we have previously mislabelled as service-included) with tips and gratuities openly encouraged OR a traditional service included model. Determining between when to charge (daytime casual, evening table service) seems like another factor to confuse guests. It's really hard to locate a standard (differences between models, e.g. fine dining expectations, contribute to this, when we want to remain accessible for guests (and for them to understand what and why). Our base salary commitment is relatively high, with London Living Wage committed across all roles, and our forecast numbers support those wages/salaries (right now). Our conservative estimates on tips Tronc still increases staff salaries by a reasonable amount. There certainly seems to be a couple of wrong ways to do service charge, which we're not interested in, but lots of 'right' ways. It feels like a mood changer/worsener to know the industry just might not work without passing on a wage portion to the guest. Keen to hear of other experiences in the comments!
Great to hear from you Tom. Service charge as a topic has totally spun me out as a 'to-be' restaurant owner now having to implement a tronc policy. From what it sounds like above in your description I would suggest having an exploratory phonecall with Tipjar i've found their model so far the most transparent and useful. I hope it works seamlessly for us but you never know - i'm sure i'll write about it if it doesn't..! ha
Thank you for explaining this, as a customer I’ve always been confused about the service charge and what exactly it was for. I’d like to know, is a tip expected / appreciated on top of the service charge or just pay the service charge and that’s great?
Very concise article Rav! You lay it out exactly as it is. After 20years in the london industry. I completely agree with you. Nice one. TipJar sounds interesting…. I hope it works!
This is really helpful, most of us have no clue about the complexities involved in running a restaurant. We all want independents to thrive and survive, it's useful to know that this is part of that. One way or another we need to be prepared to pay. It's not much practical use to bemoan the loss of a favourite restaurant when we don't support them financially. I think about how tough it is when I see the cost increases in the supermarket. Restaurants get slated for increasing their prices by a fraction of this but they face increased costs too. I wrote far more than I intended to here. I appreciate the detailed explanation, thank you