The Union government on Monday announced that paying service charge at restaurants was a choice of the customer. The announcement made it clear that customer was king when it came to paying service charge but the same hasn't gone down well with restaurant owners. While many customers have welcomed the move, restaurant owners believe that it will cut short the industry's survival.
"Service charge translates to better payment for our staff. It contributes of 20 per cent to 40 per cent of salary of not just the waiters but also house keeping staff. It acts as additional income over and above the government mandated minimum wages. Support staff inquire about the service charge we levy on customers when they come looking for a job because they know that it makes their pay better. Their salaries are going to take a hit," said Pravesh Pandey, operations head of a restaurant chain in Bengaluru.
Restaurant owners also claim that after service charge was introduced the industry had slowly moved away from its image of being a low paid industry and more people started coming into the workforce but now the prejudice may set in again. "Without service charge being levied, the restaurants will have to bear additional 17 per cent to 18 per cent labour cost and inevitably lower salary slabs. How else can we handle the situation?" he asked.
While most restaurants levy service charge in their bills, some prefer to leave it to the customers to tip the waiter. For those restaurants, the move makes very little difference. We do not levy service charge at your restaurant but those that do will be negatively impacted. "People will obviously not want to pay but we do hope that implementation of GST will bring some clarity. We are waiting to know what exactly it will offer since GST will standardise Supreme Court's rule. For now it is a choice but we would like it to be clear," said Chandra Agrahara, co-owner of a restaurant.
Customers don't buy argument
While many restaurant owners believe that the move will curb enthusiasm of business and affect the tourism industry since managing restaurants will become difficult, customers have a different take. Most believe that the restaurants were in fact deceiving them by not making them aware that paying service charge was a choice. "Restaurants made it seem like it was compulsory to pay service charge. I never knew that it was a choice. This is clear deception and I do not like being taken for granted," said Mahadev a regular restaurant goer. While customers do not mind tipping the person waiting on them, paying high service charge is something unacceptable. "I will not say that I won't pay but I will choose to tip the person who waited on me. It will be a choice and not out of compulsion," he added.
Some restaurateurs believe that this will be added burden since they already bear the brunt of payments in legal and illegal forms. "The law on restaurants in India is ambiguous. We spend too much on landlords, police, municipalities, excise department in legal and illegal means. Without service charge completely burden of labour cost also falls on us and the profit margin in almost nil," said the owner of a restaurant chain who didn't want to be named.