False gratuity

Where does that 10 percent service charge in restaurants go? A hint: Not to your server

By Enru Lin  /  Staff reporter

Tue, Jul 09, 2013 - Page 12

Liu Hsing (劉興) has worked in the restaurant industry for over 10 years. He started at a small eatery and, two years ago, moved up to a mid-scale Thai restaurant where he works 9.5 hours a day, five or six days a week. His salary rose along the way, though not by much: from NT$22,000 to NT$27,000.

“It could be that I’m paid more now because this restaurant includes a service charge,” Liu said to the Taipei Times just before the lunch rush. But Liu, like other waiters and waitresses, is not sure.

Employees in the dark

Twenty years ago, a service charge was rare and almost exciting, the touchstone of newfangled Western-style restaurants. Today, nearly all mid to high-end Taipei restaurants have one, whether their cuisine is American, Japanese or Thai, or presented as a buffet, waited dinner or hot pot. Typically, it’s a flat rate of 10 percent of the bill.

The name itself is somewhat misleading because it implies that the money is for the server, or for the service team. In Europe, where the service charge system emerged, that is often true: The fee is divided and directly disbursed to service staff.

But under Taiwanese law, the service charge is considered general restaurant revenue, and the owner is not obligated to pay all or any amount directly to the servers, the cooks, the dishwashers or any member of the service team. And it seems that few restaurant operators are doing so.

“That income isn’t for the servers — it’s so that restaurants can balance their budgets. The profit margin of restaurants is actually extremely low,” explained the owner of Ishizen Japanese Restaurant (石膳相撲火鍋), who asked not to be named.

Her restaurant is not alone. In a telephone survey of 17 self-identified employees at randomly selected Taipei restaurants that have a service charge, all respondents said that the revenue goes to the owner.

Of the 17, 12 respondents told the Taipei Times that they are “unsure where the money goes after that.”

Only five said they think the service charge is benefiting servers. One of them — at Robin’s Teppan (Robin’s 鐵板燒) — said the charge is directly passed on to the service team. Employees at Kitchen Pucci (葡吉小廚) and Schwarzwald (黑森林德式美食) said that the money pays for staff meals and holiday events. The remaining two employees said they believe the charge subsidizes wages: They are uncertain how much the service charge contributes, because it’s not listed on the paycheck as an item added to a stated base salary.

Higher wages?

A service charge probably does boost wages — if only a bit. At Robin’s Teppan, Top Thai and Chef King, employees reported that their starting salary had been above NT$23,780, which is the average starting salary in Taipei’s dining and hospitality industry, according to a 2012 survey by the Taipei City Employment Services Office (勞工局就業服務處).

Take Wow Prime (王品), where the lowest starting salary is reportedly NT$27,000 a month. The server can tell himself, if he wishes, that the additional NT$3,220 is a bonus for memorizing ingredients, walking like a butler and coping with motley crises with elan and a smile.

But he probably won’t, because the bonus is not identified on the paycheck, and because the bonus doesn’t correlate with his performance from month to month. If displeased customers complain that they ought to be getting better service for that 10 percent, they are holding him accountable to a fee that, in the server’s mind, benefits him only if he strains his imagination.


In 12 of the 17 restaurants surveyed, customers do have the option of directly tipping the server. In all 12, tips are added to a pool and evenly divided among those on the shift.

But customers rarely choose to tip after already paying the 10 percent service charge. “To be truthful, nobody tips us besides foreigners,” said a server at Trio Bistro Bakery & Cafe (TRIO義式庭園).

In some restaurants, like Wow Prime and Ishizen Japanese Restaurant, tips are refused outright.

“Tips are a bad idea invented by Americans, and our waiters are forbidden to accept them,” said the Japanese restaurant’s owner.

“Look at it this way: There is one person who serves you at the table, but behind him there are nine people who provide service. Why should just the one person receive a tip for service?” she said.

Liu, whose employer also enforces a no-tip policy, said that the effect of tips can be achieved in other ways.

“Restaurants can give servers the service charge, or offer good wages and benefits. Treat employees like a golden egg,” he said. “I think that if we had things like that, we would feel more of an incentive when we are on the job.”