Across the board, tips and gratuities pretty much mean the same thing. In the service industries, though, some establishments may view gratuities as amounts automatically added onto a bill and tips the discretionary amount left by a patron. However, the government (including labor law and the IRS) usually does not make any delineation between the two and considers them the same (although, depending on the state, sales tax may be applied to mandatory/automatic gratuities). However, a “service charge” added onto a bill is a bit different. Unlike an automatic gratuity, which customers can usually refuse to pay, a service charge – in most states – is something the customer legally has to pay, like a package-handling fee or a labor fee at the oil-change garage. This charge also may be subject to sales taxes.
Necessary or Presumptuous?
Service charges and automatic gratuities are gaining ground in spas and high-end salons. Although owners and managers acknowledge it won’t work for every spa, those who do add them onto bills say they have good reason to.
It puts clients at ease. “Tipping puts the client in an awkward position,” says LeVonne Biggs, owner of LeVonne de Spa in Waterford, Mich. For the past 10 years, her spa has added a minimum 20% gratuity to all services booked online (where the majority of services are now booked). “It takes out the guesswork,” she says. Another benefit is that the customers don’t have to travel with cash; they can simply come and go.
Some clients think the tip is already included. “Some international guests think it is already included in the prices,” says Waikiki Plantation Spa manager Michiko Hikita. Common practices in some countries (especially in Europe) is to include a service charge. To ease the confusion, Waikiki Plantation Spa, like most other spas in the area, has an automatic service charge added onto all spa services.
It ensures equitable service and a fair system for service providers. Although some guests don’t tip because they think the tip is already included, others simply don’t tip because it isn’t a part of their home culture. Eleuthera, The Spa & Salon at Bahama Bay Resort adds 18% gratuity service charges onto all its services. “Most guests are international, and they don’t tip,” says owner Alison Slemmer. Making sure service providers earn the customary gratuity regardless of their clientele does a few things: It ensures hotel and resort spas and salons can hire and retain top-notch staff, it ensures staff members aren’t tempted to let work ethic slide for a day’s booking of international guests, and it ensures that in independent contractor or booth rental salons, service providers don’t choose not to serve international guests.
Common Client Questions
Where does this money go?
Because clients aren’t handling the money directly to their service provider, they may worry that their tech isn’t getting it or that she’s only getting a portion of it. But the salons and spas we talked to said all or almost all of the automatic gratuities and service charges went directly to the service providers. If your salon has an automatic fee added onto the bill, assure clients the service charge isn’t just a sneaky way for owners to siphon off some of the tips.
Is a tip expected on top of it?
Clients may seem even more perplexed by the tipping system when unexpectedly encountering an automatic charge. This is just one more reason owners need to make it clear that the full charge is going to their tech (or will be split among service providers when a package has been purchased).
What is the service is substandard?
Although including a flat fee for services makes a statement that the salon or spa believes all services will be exemplary, clients know that sometimes it will not be. If a client complains about the service, you can always offer to take the service charge off of the bill.
What it means in taxes for the tech
The automatic service charges and gratuities really don’t have much of an impact on a tech, assuming said tech has been reporting her full amount of tips all along. The only difference is that with service charges, the tech may not see the tip until her pay day (which may be the case with credit card tips and gratuities anyway).