Why do British restaurants call their automatically added service charges anything from "optional" to "discretionary"?

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Accepted answer

Tax law. If it's discretionary, it is a tip, then the staff may be responsible for paying income tax or National Insurance (a.k.a Social Security in the US) themselves. If it is a compulsory fee, then it is a wage and the restaurant is responsible for taxes. By stating the fee is optional, the restaurant relieves itself of having to handle these taxes.

This differs from the United States where the law is that if it shows up on the bill, it's not a tip and subject to withholding. Therefore, in the US there is no incentive to point out which charges are optional (as the large party service charge often is).

Upvote:5

In addition to possibly being of some administrative benefit as user71659 has suggested, these service charges are also a way that restaurants use to confuse customers into paying more than they otherwise would. In the past, it was common and expected in the UK for restaurants to add a service charge to the bill for large parties (usually parties over 6). However, recently, some restaurants started adding "optional" service charges to tables of any size.

The restaurants hope that customers will not notice the extra charge, and might tip in addition to the charge. Contrary to expectation, the service charge may not fully go to the service staff. In some cases, the entire fee may just go back to the restaurant. This practice came under scrutiny last year, and there was some suggestion that it might be banned, but this hasn't gone anywhere yet.

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