Service Charge meaning in hospitality

A service charge is an extra fee added to your bill in a hospitality place. It’s usually a percentage of the total bill, 10-20%. This is to cover the cost of service provided by the staff, waiters, bartenders or hotel porters. In some places it’s included in the bill, in others it’s up to you to decide.

Service charges play a big role in the hospitality industry as it directly affects staff income and customer satisfaction. For businesses, it ensures fair pay for service staff, especially in countries where base wage is low. For customers, understanding service charges helps them budget for their dining or accommodation experience. It’s also a way for establishments to maintain competitive pricing while still providing good service.

You’re a restaurant manager of a busy bistro. You’ve just implemented a 12.5% service charge on all bills. When you explain this to your staff, you might say, 'The new service charge will be shared among all front-of-house staff based on hours worked. So your take-home pay will be more stable regardless of how much individual customers tip. Just inform the customer when you present the bill that this charge is included so they know they don’t need to leave an extra tip unless they want to.'