To Tip Or Not To Tip?: Demystifying Service Charge

Those of us who like to eat out are probably familiar with a certain conundrum that ensues once the bill arrives and no, it’s not about whether you or your bombshell of a date should be the one to foot the bill. (This isn’t exactly the blog to consult for that sort of thing because we, or at least I, don’t know the answer to that either.). Whether your server was perfectly charming or perfectly smelly nasty, deciding whether to tip or not can also depend on whether the words “service charge” appear on your bill.

What is Service Charge Exactly?

A service charge is basically an additional fee charged by a service establishment (e.g., restaurants or hotels) on top of your bill. While service charges in general are accrued to cover a variety of miscellaneous business expenses, but their most common purpose is to contribute to a service employee’s wages.

In a nutshell, it’s like a mandatory tip of sorts.

How is Service Charge Computed?

In the Philippines, the service charge is usually comprised of a percentage of the total bill (anywhere between 10-15%).

Where Does Service Charge Really Go1

Does It Go Directly to the Employees?

Mostly, yes. Under the law (Article 96 of the Labor Code of the Philippines, if you want to be specific about it), 85% of the total service charges collected should be split equally among all the service employees. Yep, everyone from the guy working the churros machine to the perfectly-coiffed receptionist working the reservation list gets the same share out of the pooled service charges.

What happens to the other 15%? Well, that bit is allotted for managerial employees.

Are Service Charges Part of an Employee’s Wage?

Service charges are not included in an employee’s basic wage, but are added on to such.

Incidentally, if the establishment were to stop collecting service charges, they would be required to provide their employees with the average amount of service charges (in addition to their basic wage) that the latter received in the last twelve months.

Where Does Service Charge Really Go2

Do You Still Need to Tip Even if There’s a Service Charge on Your Bill?

Tipping isn’t exactly mandatory in the Philippines, but no one will stop you if you wanted to reward your server for say, single-handedly bringing your party of 15 all your dégustation courses (and managing to do it all without tripping of breaking a sweat throughout the evening). Unlike in other countries, there isn’t really a standard percentage for tipping. So, it’ll all depend on your generosity discretion.

On the flip side, it’s probably fine for you to “forget” to leave a tip if your waiter kept calling your girlfriend “babe” throughout the dinner service.

Are Tips Distributed in the Same Way as Pooled Service Charges?

It all depends on the restaurant owner and/or manager’s discretion. Some prefer to pool the tips and then distribute them evenly among the staff at the end of the shift as a collective reward for a good group effort. Some allow the individual servers to keep the tips directly given to them as an incentive for maintaining an exemplary level of service.

Given that local culture favors sharing, however, the former is practiced more frequently.

Where Does Service Charge Really Go

What are your thoughts about service charge and tipping here in the Philippines? How do you feel about tipping abroad? Tell us with a comment below!

13 Responses

  1. As a student, I do not give tips when there is a service charge. I also believe that when I visit a resto/cafe very often, I feel not so obliged to tip because I think my loyalty is enough. Hehe! Except if I had a satisfactory dining experience. These days, servers with really good work ethics are not so common anymore. I really appreciate those who nice to me did really well. I never hesitate to tip.

  2. I do not give a tip as soon as I see that there is a service charge, because:
    1. It is not my responsibility to ensure that the staff get paid adequately. It is the restaurant owner’s responsibility to do that.
    2. It is a fact that there is at least 50% profit in each dish, and at least 70% for each drink. The owners should share this profit with their staff.

    Tipping should be just that: a form of gratuity that we give someone who has served us well.

    Service charge is like paying for the same thing twice. When doing the costing for a dish, a restaurant owner has already factored in a salary for the staff. Now, the restaurant owner can give the staff a smaller chunk of the budgeted salary (and pocket more profit) because hey, they can require customers to fork out an additional 10%.

    It is emotional blackmail. You feel sorry for they staff if you don’t leave an additional tip, and yet, you should not feel guilty, because if the restaurants cannot afford to pay their staff well, then they should close their doors as their business model is wrong.

    The restaurant owners are laughing all the way to the bank……

  3. I’m not beng a cheapskate here but why is there an extra charge for services that are expected from a service establishment like restaurants and hotels? Aren’t they paid already thru their salaries? In the US, especially in certain states like New York, it is MANDATORY to tip 15% of your bill which I also feel exhorbitant. Imagine if your bill is a hundred dollars, then you ar required to give a minimum of 15 dollars! And sometimes, that’s on top and of a service charge they include in your bill. Here in the Philippines, if there is a service charge, I just leave, at most, a 20 peso bill as tip.

    1. In the U.S., tipped employees such as servers and bartenders are not payed a salary based on minimum wage like the rest. They are paid a much smaller amount which usually covers enough for the taxes they need to pay and automatically deducted by management through government order every paycheck. Therefore their only means of existence is the “tip” they are given for their service. The 15% or so tipped that is customary suffices as their salary to live a normal decent life. New York is a very expensive city to live in and people who live there know this so they tend to give higher tip.

      1. This is true. I worked as a dealer, and we and the waitresses get paid just over half of the Federal minimum wage. And we rely so much on the generosity of the players/customers for our living.

  4. Apparently not everyone working in an establishment gets their fair share. I have noticed that most of food establishments employ people from certain agencies and cooperatives. They are not considered as a direct employee but as a service provider. With this considered, I hear that these companies do not give the share of SC to rank and files (who are outsourced) and only regular employees are getting their share.

  5. Some restaurants actually have service charge for the kitchen staff only, so waiters’ only additional pay are tips.

  6. Based on my previous stint as a line cook, the service charge and tips are given as one, and distributed to us staff every Monday. Though tipping isn’t really mandatory unlike service charge, I believe leaving a tip (and sometimes, a thank you note on an unused tissue) can actually brighten the staff’s day, especially if they’re slammed on a Friday night.

    I know because I’ve been there. It never hurt to let the floor manager or the head chef how great your dinner turned out to be by leaving a gratuity, no matter how much it is.

  7. If there is service charge i don’t give tip, but if the service is really good, with or without service charge i do give tips depending on how i enjoyed the food and the experience.

    in US they even let you add your tip before they swipe or tap your card. Sometimes even the service is bad you need to give them their service charge, even taxi has service charge…

  8. When the resto bills for service charge, I simply reduce the amount of tip I would have given had there been no service charge. (e.g. leaving P20 instead of P50)
    I have friends who are against leaving any amount of tip when the service charge is already included, but I feel bad leaving nothing even if it’s just a few coins 🙁

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