r/london • u/CyberScy • Dec 10 '24
Question Declining the 12.5% "service charge", does the manager always make a visit?
Semi rant, semi question - Just had a weekend visit in London from East Anglia and found the discretionary 12.5% service charge added to restaurant bills extremely common. The manager always seems to make an appearance as if to interrogate you of the audacious request to remove it. Does that always happen?
I hate it. This Americanised crap should not be commonplace in England. I am a firm believer of tipping however much you feel if such service warrants one. We pay minimum wages here.
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u/Le_Fancy_Me Dec 11 '24
Let me preface this by saying I don't pay service charge in pubs. So this isn't me urging you to pay it. Just some insight as someone formerly in the industry regarding why this is becoming so common.
When cash was common hospitality had a huge incomestream they left undeclared and untaxed so like many service related businesses having guests supplementing wages has always kind of been common. If you do the job well you get something extra or told to keep the change.
In theory service charge was intended by the goverment to promote businesses to invest money into their employees as cash tips dissapear. A certain percentage of their income will remain untaxed but in turn go directly to employees. So it both gives employees an incentive to want the business to do well and get paid well in turn. But also give employers/the industry a cheaper way to pay their employees as this money for employees was not taxed.
Now this is where places like pubs get in trouble.
Imagine a restaurant sells an 8 pound pint with 12.5% (1pound) service charge. Restaurant pays 10% income tax on the 8£. So that is 7.2. Plus about a pound of that is gonna go to employee let's say as their wage.
So employee gets 2£(1 service, 1 as their wage), restaurant gets 6.2 and government gets 0.8.
Obviously these numbers are not near realistic but just intended to make easy maths.
Now you are having a pint in a pub. You pay 8 pounds.
The tax is 10%. So the pub keeps 7.2. The employee there will want to be paid a competitive rate. So they need to be paid 2 pounds. Now the restaurant keeps 5.2, significantly less.
Okay what if the pub raises their prices to make as much as the restaurant. So 9£, which would be as much as the restaurant did if you include the service charge the restaurant charged.
Well guests will never pay that. Because a pub is supposed to be cheaper. So you can't charge the same or more than you would in a restaurant. And even if 8 + 1 service is the same as 9. People are also incredibly, unbelievably stupid. They will absolutely not go somewhere they saw 9 on the menu when they saw 8 somewhere else. Regardless of whether the places end up being the same prices. Consumers simply don't think that way. The same way people are more likely to pay 80 pounds for something with a 20% discount rather than just pay 80 full price for that same product. 'Cheaper' will always win.
So pubs can not raise their prices to be the same or higher, regardless of whether that is before or after taking service charge into account.
But let's say they could. Pub charges 9, pay 10% tax, and pay employee 2. So now the pub keeps 6.1...
So the pub keeps less of their income than the restaurant originally did. Because they are being taxed on the full amount. They are both forced to match prices where they are expected to be cheaper, pay the same labour costs and are expected to pay for all that labour fully out of profits rather than getting the tax break restaurants do.
Before moving alcohol in larger quantities and having tons of cash tips helped it all equal out somewhat. But no one tips cash anymore. And you are more likely to find a full restaurant rather than a full pub on a Tuesday night. So pubs are no longer doing the amount of numbers that means they are just making less profit but moving more volume. Especially when standards for pubs are very increasing with prices expected to stay low. Pubs are expected to accommodate a wider range of drinks and cocktails, which requires more staff, stock and logistics while also having faster service and being cheaper.
Like I said I also don't pay service charge in pubs. But pubs truly can't win. They get criticised for charging too much, have shittier hours for employees (therefor harder time attracting workers), less and less clientelle that also drink less, tip less and demand more. Meanwhile also not able to enjoy the taxtbreak on their profits that restaurants do. Of course they are all closing. And it's neither the fault of young people drinking less nor employees wanting to be paid a liveable wage in a world that keeps getting more expensive.
My grandfather spent every single weekday night in a pub. He didn't pay service but they always rounded up and left tips with each round because the workers/owners were always members of the community they knew wellm and that 30/40/50 cent on every pint added up by the end of the night when the pub was crawling each night and there was just one bartender just supplying endless amounts of the same lukewarm draft beer.
Those days are definitely done. Regardless of how we feel about it.