Service charge

A percentage a venue adds to food and beverage that may or may not be paid to staff, and may itself be taxed.

How it works in practice

A service charge is a fixed percentage a venue or caterer adds to food and beverage. In Toronto hotels and banquet halls, 18% is common. It may cover servers, captains, kitchen staff, banquet management or simply the venue’s overhead. The contract rarely says which, and staff do not always receive it.

A gratuity is a payment intended for the people who served you. Some venues call their charge a gratuity, some call it a service charge, and some charge both an administration fee and a gratuity. The label matters less than the answer to one question: does this money reach the staff on the floor tonight?

Service charges are taxable. HST applies to the service charge as well as to the food and drink it is calculated on, which is why the jump from menu price to final invoice is larger than people expect.

Worked numbers

A $15,000 menu is a $20,000 invoice. If the client also tips the captain and bartenders in cash, budget that separately.

Questions to ask

• Is the service charge applied only to food and beverage, or also to room rental, AV and labour fees?
• What portion is distributed to service staff?
• Is additional tipping expected or discouraged?
• Does the F&B minimum include or exclude the service charge?
• Are bartender and chef attendant fees charged separately, and are they also subject to the service charge?

How to handle it

1. Get the percentage and its base in writing at the proposal stage.
2. Check the BEO charges block to make sure it is applied only where agreed.
3. Put service charge on its own line in the event budget sheet, followed by HST on the combined figure.
4. Tell the client before the night whether a separate tip is expected, so nobody is improvising with an envelope at midnight.