What Is That Mysterious 'Service Charge' Restaurants Put On The Check?

Understanding restaurant bills when dining out isn't always the easiest task, but it's important to know what you're paying for. Although you should always check your fast food receipts, going through the restaurant bill line by line can be awkward as hell, especially in front of your server. If, like many of us, you read the receipt once you've paid, you may notice an additional fee added under something called a 'service charge.' What exactly does this mean? And why are diners paying for it?

A service charge is different to a service tip, and is usually calculated as a percentage (anywhere from 10 to 20%) of the total bill. This fee can help restaurants cover operational costs, covering part of back-of-house staff wages, or even paying for employees' health care. Including this charge separately is also a way to avoid raising the menu prices, which diners often don't respond well to.

Numerous independent restaurants are struggling and several, once-popular restaurant chains have filed for bankruptcy. The restaurant economy is tough and margins are slim and owners claim that this additional service charge can help their businesses survive.

If you're living in the United States, you'll know that a tip goes straight to the server, making up for their (often low) hourly wage. While tips might be pooled and divided later among staff, this money should always end up with the employees. In contrast, a service charge goes directly to the employers, and how they use this money is up to their discretion. A tip is also considered optional, while a service charge is mandatory. 

If your bill includes a service charge and you're unsure whether you should still tip, the answer is yes. Service industry workers receive a 'tipped minimum wage' which is lower than a regular minimum wage (the rest of their wage should come from tips). And since the service charge doesn't replace this, always tip your servers (even if you've ordered takeout) — they're relying on it.

The only time this might change is outside of the U.S. Many countries in Europe pay their service workers a higher wage, and employees don't expect tips. Some countries like Italy or Spain will include a service charge, which usually means you're not expected to tip. Even if there's no service fee included, a tip isn't expected, but rounding up the bill or adding a small tip is always appreciated.