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Thread: About the Service Charge on your bill...

  1. #1
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    About the Service Charge on your bill...

    Discussion and misinformation is once again being discussed on the net. Apparently the information being posted is not exactly accurate. This is an often confused issue and we are addressing it again for our visitors to understand.

    We have discussed this in detail in 2012, 2014, 2017, 2018 and 2019. I have some intimate knowledge on this as I have helped local businesses design their accounting programs. The service charge is an accounting line item that needs to be correctly applied or the business is in breach of the Jamaican labour laws.

    Unlike the US, Jamaica does not allow for a "sub-minimum wage" to be paid to servers. There is no "tipped" or "non-tipped" employment category for Jamaican workers. The minimum wage applies to every worker.

    When Jamaica began to be a serious tourist destination, the government sanctioned the "service charge". This is not a tip, per se, but an addition to the normal pay that all hourly employees share equally. Here is what I wrote in 2019:

    "The vast majority of all Jamaican businesses would never have a service charge. As with many countries, Jamaicans normally do not tip nor expect to get one.

    Because of the growth of tourism, tipping entered the mix and began to pose some problems.

    The American version of tipping can create a huge disparity in wages. To give a single server a 10 to 20% tip creates serious inequities, especially when everyone knows that many other workers contributed. This is why the concept of a service charge was created.

    A service charge is not a mandatory practice, but a voluntary one.

    Businesses are given the choice to enact the charge as a way to reward all workers during a busy period, such as the tourism high season. This increases the price of the final bill, but the increase goes directly to all the hourly employees.

    You are still free to give your server a tip should you desire. Rest assured that your tip is greatly appreciated.

    But a service charge allows the business to provide a steady wage year round, and at the same time give all the workers a "bonus" when times get busy.

    It is noted with the prices on a restaurant menu or on your hotel's "fine print". It will then be shown on the bill and receipt along with the taxes."


    Here is what I wrote in 2014:

    "The service charge is NOT anything the restaurant wants it to be. It is a line item on the business accounting and is shared among all hourly employees. That includes the servers, the cooks, the dishwashers, the groundskeepers, the maintenance folks, etc. It is illegal to have a service charge on the bill if it is not shared. The fine has been raised to discourage any misuse of these shared service charges to the employees. Unfortunately you were given wrong information."

    And again what I wrote in 2012:

    "If your bill has a "service charge" then this is a shared tip for all the hourly employees, not a direct tip to your bartender or server. The Jamaican government enacted the service charge so that more Jamaicans benefit.

    A service charge of 10% is added to the bill, then it is totaled from all receipts during that pay period, and then split between all hourly employees equally, from the bartender to the gardener to the housekeepers. That way, when a guest purchases something, more than just the server makes a bit of money.

    For a simple example, lets say a server hands you a bill for us$100, with a $10 service charge added. The server will not get that $10 service charge directly. Lets suppose there are 10 employees total at the property who work the same amount of hours. At the end of the pay period, that $10 charge will be split between all 10 employees equally based on their hours worked. So while the server did not get the entire $10, they did receive $1 from it as did all the other employees.

    The service charge is set at 10% so that it leaves room open for you to tip the server directly - and that tip is up to your discretion. You can leave an additional 5% that they will keep for themselves, or any additional amount that you choose.

    It is often speculated that the employees never see the service charge. You may even hear that from the employees themselves. But this is simply not true. If a business has a service charge, then the business can be fined and even closed should they not share this with all their hourly employees. A server may say they never see the money, but they do see their percentage of that charge which is of course much smaller depending on the number of employees. For the example above, the server may feel they didnt get anything from it, because they never saw 90% of the charge. But they did receive their percentage on their paycheck."


    I hope this clears up the issue a bit.

    Negril.com - For the vacation that never ends!

  2. #2
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    Re: About the Service Charge on your bill...

    I have never been a fan of the service charge model because in my opinion the restaurant should compensate each job accordingly and chefs should make a higher hourly wage than a server, hostess, or dishwasher. Sadly some just pay the minimum wage across the board which is extremely low. The days of finding cheap meals in most of the main tourist areas of Negril seem to be behind us if you're talking about places that impose this service charge. By that I mean they're charging high profit margins and the additional service charge allows them to compensate their employees a little more while offsetting their labor cost from the wallets of their customers. That being said, it is what it is. I normally tip 20-25% and I usually still do at places with the imposed service charge. I believe in taking care of the people who take care of me. However I personally tend to choose places that don't impose the additional fee and don't generally go back to places that do unless I really like the food or a group I'm with wants to go.

  3. #3
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    Re: About the Service Charge on your bill...

    This is great information (especially for people who come from countries where tipping is de rigeuer (US)).

    I come to Negril for fun so my default fiscal setting shows all the restraint of a drunken sailor on shore leave.

    I was unaware of the meaning of the “service fee” and always tipped as I would in the US.

    But if I understand this message correctly the implication is I’m not offending Jamaicans by tipping.
    Right?

  4. #4
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    Re: About the Service Charge on your bill...

    Rump,

    You are definitely NOT offending anyone by tipping.

    To all,

    The Service Charge is added by some businesses so that ALL THE HOURLY STAFF shares in the benefits when times get busy, such as now.

    When you tip the "person who took care of you" at dinner, that tip you give to them does NOT take care of ALL the people who took care of you. What about the chef? What about the dishwasher? What about the groundskeeper? What about the prep staff? Your tip is not taking care of any of them although each and every one assisted in making you dinner a pleasant experience.

    Any business person knows that wages must be set on the average revenue of the business, not on the exceptionally busy times. Even during busy times, how busy you are from day to day varies. If wages were set on the busy times, during the slow times the business would be forced to close. Business 101. And having a service charge or not having a service charge would not change the base wages as wages are not based on the service charge, but the job performed.

    The optimum solution to even out the wages is to add a Service Charge. Right now, when restaurants are busy, those charging a service charge makes sure EVERY HOULY EMPLOYEE shares in that extra money being made, not just the waiter or waitress who generally gets the tip. Every hourly employee goes home on payday sharing in the increased profits of the business with a larger check.

    By avoiding places with a service charge on purpose just means that all the staff that makes your visit a pleasant one are being cut out of those increased profits and you are making sure that one person ends up making a very disproportionate amount of money.
    Negril.com - For the vacation that never ends!

  5. #5
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    Re: About the Service Charge on your bill...

    If I may paraphrase Walter (from “The Big Lebowski):
    The preferred nomenclature is “Rum”, Rump is funny but it makes me think of someone else. I just can’t put my finger on it.

  6. #6
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    Re: About the Service Charge on your bill...

    Thanks for the explanation Rob. Why do some restaurants (usually the higher end ones) add 15% GST in addition to the service charge. I always prefer the smaller restaurants that charge in JMD as they never include the service charge or GST. At small local restaurants I tip as I would in the US.

  7. #7
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    Re: About the Service Charge on your bill...

    Quote Originally Posted by TedP View Post
    Thanks for the explanation Rob. Why do some restaurants (usually the higher end ones) add 15% GST in addition to the service charge. I always prefer the smaller restaurants that charge in JMD as they never include the service charge or GST. At small local restaurants I tip as I would in the US.
    GCT, the General Consumption Tax, is paid to the government by all legal businesses selling over j$10,000,000 annually. To display the tax separate or include it in the price is up to the business, but needs to be paid nevertheless.

    Businesses including it in the price have to back out the tax and pay it.

    Many businesses don't hit the $10,000,000 threshold so are not required to collect or pay.

    Small, family run type businesses have no reason for a service charge as it was designed to even out the wage discrepancy for larger businesses with large staffs, most of whom never receive a tip.
    Negril.com - For the vacation that never ends!

  8. #8
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    Re: About the Service Charge on your bill...

    I always tip whether I see service charge or not but now I have a question......How do we truly know if the workers are getting anything from that service charge?

  9. #9
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    Re: About the Service Charge on your bill...

    Quote Originally Posted by Jamerican71 View Post
    I always tip whether I see service charge or not but now I have a question......How do we truly know if the workers are getting anything from that service charge?
    I quoted Rob from his original post....

    "The service charge is NOT anything the restaurant wants it to be. It is a line item on the business accounting and is shared among all hourly employees. That includes the servers, the cooks, the dishwashers, the groundskeepers, the maintenance folks, etc. It is illegal to have a service charge on the bill if it is not shared. The fine has been raised to discourage any misuse of these shared service charges to the employees."

    This no different than any other country where tipping is accepted.

  10. #10
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    Re: About the Service Charge on your bill...

    Quote Originally Posted by Jamerican71 View Post
    I always tip whether I see service charge or not but now I have a question......How do we truly know if the workers are getting anything from that service charge?
    If the business has a service charge and doesn't distribute it correctly, the last I heard the fine PER OCCURRENCE is j$2,000,000.00.

    This is considered tax fraud. The government doesn't like that.
    Negril.com - For the vacation that never ends!

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