In June, the Central Consumer Protection Authority (CCPA) — a relatively new body, which was only set up by the Ministry of Consumer Affairs, Food and Distribution in July 2020 — announced five major guidelines that forbade restaurants and hotels from levying service charges on customers’ bills.
Early this month, The National Restaurant Association of India (NRAI) argued that levying a service charge is not illegal and is a matter of restaurant policy. The association, which represents over 5,00,000 restaurants in the country, has firmly defended the service charge since it can be taken off the bill upon a consumer’s request.
“Service charge is a part of the owner’s discretion/decision regarding the total price payable by a customer with regards to the sale or service of a product. It constitutes one of the components of the total price of the product. Neither the government nor any authority can interfere with the decision of the business owner in this regard. It is a universally accepted trade practice,” NRAI said in its statement.
Most restaurant owners agree that a five to 10 per cent service charge goes a long way towards the welfare of the back-end staff, especially in an industry that is still reeling from the effects of the pandemic.
My Kolkata asked some city-based restaurateurs about their take on the debate, and how the new guideline affects them
May demotivate the mid-sector staff: Azra Golam, Aminia
Popular legacy brand Aminia, which has around nine outlets in the city, never implemented the service charge. However, Aminia’s Azra Golam argues that a ban on service charge may put a dampener on the overall spirit among workers.
“Aminia has a very price-sensitive audience, and adding a service charge might be a pinch in the customer’s pocket, hence we never implemented it. We left it up to them to tip the servers in case they wanted to. I personally believe making it illegal might demotivate and affect the mid-sector staff in fine dining and five-star hotels more than brands like us,” shares Golam.
A service charge is not unreasonable: Raghav Khullar, Caffeine ‘N’ Carburetors
Raghav Khullar, who owns the automotive-themed joint Caffeine ‘N’ Carburetors, thinks the service charge is a justifiable fee when one considers the bigger picture. “We’re in the business of turning moments into memories. While it’s a choice and cannot be enforced on a customer — in my mind, it’s not unreasonable to request it. A pragmatic way of viewing service charge is to consider it as an incentive for the restaurant team that ensures that standards of food and service are impeccable. It justifies the small fee,” he shares.
Raghav Khullar at Caffeine ‘N’ Carburetors
We accept the regulations: Vanita Bajoria, Warehouse Cafe
Kolkata-based entrepreneur Vanita Bajoria, who owns the new resto-bar Warehouse Cafe, along with popular hotspots like Veneto and Lord of the Drinks, tells us that her team is in sync with the new policies.
“As per the new CCPA guidelines, we are aware and in sync with the implementation of informing the consumer that service charge is voluntary and at the consumer's discretion. However, it was an added incentive for the service crew to provide the best-in-class service. At our outlets, we will educate our staff and reinforce the rules. We accept the regulations laid out by the authorities and will continue to serve our guests with utmost honesty,” Bajoria shares.
A great incentive in the post-pandemic economy: Shreevardhan Asopa, LMNO_Q
Shreevardhan Asopa, one of the owners of Kolkata skybar LMNO_Q, says the service charge works like a monthly incentive for the staff, at least till brands can go back to paying them pre-pandemic salaries.
“We levy a 5% service charge, which is optional. Service charge is an important aspect of a dining experience and people should understand that it does not go to restaurant owners, but is meant for the welfare of the staff, especially the backend staff. The service charge is distributed amongst them and it is a motivational factor for the staff as they look forward to it – like a bonus. While we are still recovering from Covid and wages of staff are yet to be normalised, the service charge is a great extra income for them,” Asopa weighs in.
Shreevardhan Asopa is a co-owner of the Park Street skybar LMNO_Q
Asopa also brings up that F&B brands may need to hike the prices of their items if service charges are done away with.
“Restaurants in Europe and America have an optional service gratuity, which is normally 15%, and people are happy to pay it as they understand the efforts that are going in to serve them. The CCPA assumes that it is protecting the rights of consumers and making the dining experience pocket-friendly, but what they don’t understand is by removing service charges, restaurants and F&B outlets will naturally hike their prices and for patrons, dining will be more expensive than it is right now,” Asopa says.
Our staff will provide the same service, give or take the service charge: Saloni Jhunjhunwalla, The Salt House
Kolkata fine-diner The Salt House used to levy a 10 per cent service charge. Business partner Saloni Jhunjhunwalla assures that the team will never compromise on their service, irrespective of the charge. However, the service charge does contribute quite a bit to staff income.
Saloni Jhunjhunwalla owns The Salt House at Shakespeare Sarani
“The serving staff relies heavily on tips and service charges over and above their salary. It is an added bonus and a huge incentive for them. We feel it should be at the discretion of the customer — if they are happy with the service they can opt to pay a service charge, if not they can always get it removed. I wouldn’t say they are part of the dining experience — our staff will provide the same service whether or not they get the service charge,” she says.