'Service' fee doesn't go to those who serve

PUBLISHED : Sunday, 26 August, 2007, 12:00am
UPDATED : Sunday, 26 August, 2007, 12:00am

Restaurants add 10pc, but it's not for the staff

It is a question one restaurateur has asked himself on more than one occasion when he feels guilty tallying up another substantial month's takings at his upscale restaurant on the south side of Hong Kong Island.

Since his establishment has hit the big time, HK$300,000 of the HK$3 million turnover comes from the 10 per cent service charge on the end of every bill.

'That 10 per cent doesn't go directly to my staff and I know for a fact it's the same just about everywhere,' he said.

'I do wonder how much better the service would be if the charge was going straight into the pockets of those waiting tables, but you can't really speak out about it because everyone else is charging it, too.'

The misleadingly named service charge also bugs the manager of an upmarket Central bar and restaurant, where the clientele are not shy about splashing out big money on French champagne or a round of Japanese steaks.

While she was not prepared to give her name, she said she had never seen any of the 10 per cent charged for every meal or drink consumed in the restaurant and neither had the staff.

'My wage is really high at HK$14,000, but others are not paid so well and they do a terrific job,' she said.

'Customers are always asking me whether the 10 per cent goes to staff or not. Many tourists just think it does, so they don't bother to leave tips. Staff members don't like it, but there is nothing they can do, and they certainly can't say anything.'

There seems to be an unwritten law in the industry that the service charge is a discussion taboo.

A number of the city's biggest restaurant chains, asked whether the 10 per cent was returned directly to staff, said they would call the Sunday Morning Post back with an answer and never did.

A spokeswoman for the Inland Revenue Department said there was no tax law covering the charge, but it had to be taxed as profit.

'Most people just regard the 10 per cent as part of the charge,' she said. 'If you don't pay, the restaurant will call the police.'

Not so, according to Steven Yip, senior associate with the Minter Ellison law firm, who said there was no law enforcing payment of the service charge.

'It is not part of Hong Kong law, and whether you have to pay is an interesting thought,' he said.

Mr Yip said that as soon as you ordered something from a menu stating that a 10 per cent service charge applied, you had entered into a legally binding agreement.

'They can sue you for the payment or ask the police to get your name or address,' he said.

Tommy Cheung Yu-yan, the legislator representing the catering industry, said the 10 per cent started in hotels and began creeping onto the end of the bill in restaurants in the late 1950s and early 1960s, especially in Tsim Sha Tsui and Central.

Mr Cheung said the question of whether the service charge was still relevant was a matter for restaurants and customers to decide.

'If you don't want to pay the 10 per cent charge, you shouldn't go into the restaurant,' he said.

Tim Noonan, the International Trade Union Confederation's director of campaigns, said the union position was that all staff should be paid a fair and decent wage and not have to rely on the discretion of customers for their income.

But Mr Noonan also said employers should not give the impression that money collected through a service charge was being used to pay workers 'when clearly it is not'. In this case, the term 'service charge' could be considered misleading.

'If employers are giving an impression that tips or service charges are there to pay workers, then that is clearly unjust and incorrect,' he said.

But that will not help the thousands of workers who will diligently collect the charge but never see the money in their pockets.

How they charge

Igor's Group, owner of 30 restaurants around Hong Kong, including Wildfire:

'Some of our restaurants charge the 10 per cent and some do not, it really depends on the individual restaurant. For those who charge the 10 per cent, a variable amount of the 10 per cent goes to the staff, again depending on the restaurant. Some use a kitty system and the money is then used for incentives throughout the year.'

Maxim's, Hong Kong's largest fast-food chain

A company insider:

'The 10 per cent does not go directly to staff but it is used to pay for their employment packages. We have different incentives for staff depending on whether they meet their sales quotas based on the performance index we work around.'

Lan Kwai Fong Entertainments, owner of a number of bars and restaurants:

'The 10 per cent service charge at our restaurants and bars is used to benefit the welfare of the outlet staff, in the form of staff meals, incentive schemes and bonuses. The tips left by customers (cash and credit card) are distributed to the staff on a weekly or monthly basis.'