Sunday, December 27, 2009

Restaurant 'service charges' illegal

Something I've always disliked is the so-called 'service charge' on restaurant bills.

The assumption has generally been that the 'service charge' goes to the staff as tips but the reality is very different. In a few establishments it does go to the staff. In others only a percentage goes to staff. In yet others the owner simply keeps it.

Generally speaking it's simply a way of charging more for the food than the price shown on the menu and that's dishonest.

The 'service charge' culture has crept in here over the past couple of years but it's now been declared illegal.

The Supreme Committee for Consumer Protection has just held its fourth meeting of the year under the chairmanship of H.E. Sultan Bin Saeed Al Mansouri, Minister of Economy.

WAM reports: "The Committee warned restaurants against the illegal service charges. This followed several complaints received by the Ministry of Economy that some restaurants were charging as much as 5 to 20 per cent of the bill as service charge, which the Committee said is against the consumer protection law number 26 for year 2006. Al Mansouri said that the Ministry will take serious measures against those who violate the law."

Good.

The WAM story is here.

9 comments:

Rami said...

Is there anything to stop the restaurants in question from scrapping the service charge and then simply jacking up their prices?

Grumpy Goat said...

Rami: Nothing at all. Except that the higher prices may cause potential diners to eat elsewhere.

Personally I prefer for the price you see to be the same as the price you pay - and sticking a tiny footer at the bottom of the menu explaining that there's a 15% on-cost is disingenuous at best.

By all means customers should leave tips. If they're left as cash rather than added to the credit card bill, there's a better chance that the gratuity will end up in the correct pocket.

Naseem said...

so true... my cousin works for a major restaurant chain in Dubai as a Chef... and the service charge used to be always distributed along the staff every month... they used to earn between 500 to 1000aed per month just from service charge.

however, since early 2009, they stooped receiving the service charge as the owner claim its recession . and until today, they are not receiving any service charge.. all taken by the owner O_o

Abu Dhabi/UAE Daily Photo said...

For Dubai or all of the UAE?

A Blessing in Tragedy said...

We already talked about this last week.

http://www.al-emarati.com/2009/12/uae-doesnt-have-taxes.html

Rip off, and never has all of it gone to the staff. Always tip in cash people.

Elle said...

I wonder why it's taken the Ministry so long to address this subject.....it's been going on for years!

Mark said...

The service charges are really just another stealth tax levied against diners. I find it underhanded that businesses are allowed to 'surprise' consumers in this fashion. This matter requires government intervention to protect consumers. Thanks for the post

Anonymous said...

went for dinner to well known restaurant on 27th...the bill arrived with the words : "10% service charge and 10% authority fees are included in your bill"
Asked our server twice if this actually included a tip for him!! Unacceptable restaurant practice. And what is an Authority fee??? Over and above the service charge!!!

opinionated alchemist said...

I think the whole discussion is a bit emotional! It was even fired up by a very one dimensional article in the 7days.
You cannot lump together all hotels. There are some which are doing wrong - most of them are doing right.

True is: the prices always need to be all inclusive! Service charge [and municipality fees] can only be included into the price - mustn't be added afterwards!

Also true is: Municipality fees are 10% and legal service charge mustn't exceed 10%.

I know, that both Jumeirah and Hyatt in Dubai are distributing the service charge to the salary of the service employees!
However the charge doesn't need only to be applied cash - it can also be used for employee benefits.
This is by a decree from 1999.

Here like anywhere else it is also mentioned, that the prices are jacked up...
Well - this only can say someone, who doesn't have a clue about cost in Dubai!

Even if I am going to Carrefour I pay sometimes a fortune for good quality products - which are not as good as in hotels!
If you going into a 5 star hotel - you receive service. But also operational costs like breakage has to be paid.
And well - we don't have to talk about the alcohol prices - even the cost prices of spirits are often more than 100% more expensive as in European supermarkets [and: there is a double alcohol tax in Dubai - for those who still think, that there are no taxes].

The verdict: FIrst stop to drop complains about things, you don't even try to understand.
Second: There are definitely bad seeds in the industry - that doesn't mean, that the whole industry is playing wrong.
Three: Some might confuse tips with service charge! Tips are always for the respective team [of a specific restaurant etc] - service charge is shared between service staff and kitchen, but also between the people in the background like stewards and room maids. Obviously a waiter deny, if you ask him/her if the bill includes the tips.
The service charge is also not an incentive for good service - so you should never exclude good tips.