Monday, August 22, 2011

{Wedding Planning 101} Service Charges vs Gratuity

{Photo Credit: Gary Guy Photographer, DW Photography, Kelly Hornberger Photography}

Planning a wedding can be a daunting task to couples. Learning the lingo is even more daunting. So we've decided to start our Wedding Planning 101 tips for our fabulous readers. We want to provide you with some tidbits of information that can help the wedding planning process be a more pleasant experience.

{Photo Credit: Gary Guy Photography}

So, let's start with the difference between Service Charges vs. Gratuity. What is the difference? Why is my hotel charging me a Service Charge? Do I still have to tip the hotel staff if I'm already being charged a Service Charge? These are one of the many questions we get asked by our clients.

What is a Service Charge?
A Service Charge is a mandatory and automatic {pre-determined} fee that is typically added to your hotel or caterer contract for the service personnel. Just to give you an idea: Most hotels in the Houston and surrounding areas charge a Service Charge {ranging anywhere from 18% - 24%} on their Food and Beverage {F&B} contract. A Service Charge is not to be confused with a Gratuity. In the State of Texas, taxes are applicable to the Service Charge, so please remember to include this when creating your budget.

So what is included in the Service Charge?
How the Service Charge is broken down will vary from hotel to hotel {or caterer}, so don't be afraid to ask for an itemized breakdown. In general, the Service Charge offsets the hotel/caterer’s labor and administration costs, such as dishwashing, packing for your event, travel time to and from your event, ballroom/facility maintenance and so forth. Keep in mind, the Service charge DOES NOT equate to a Gratuity; therefore, it DOES NOT cover the gratuities for the wait staff {unless specifically noted by your caterer}.

{Photo Credit: DW Photography}

Service charges are NOT commonly billed by your other vendors {ie: photographers, videographers, officiants, etc.}, as the bulk of their entire business is a service...a service you have already hired them to provide you.

When you receive a proposal from a caterer or hotel/banquet facility, you will more than likely note a price per person, and notice a "++" after the price per person. What does this mean to you? Let's say your price per person at any given Houston hotel is $65.00++. As mentioned before, your Service Charges will range anywhere from 18% - 24%, depending on the venue/banquet facility/caterer. In Houston, Sales Tax for food and beverage is 8.25%. So, how do you decipher your total? Your cost per person is $65.00 "plus" a Service Charge of, let's say, 21%, "plus" Sales Tax of 8.25%.

What is a Gratuity?
A gratuity {also known as a tip} is a voluntary amount of money given in exchange for a service performed. For example -- We typically tip our waitstaff or our hair stylist for great service. Gratuity to the staff is soley at your discretion. If you are working with a caterer, they may ask that you tip them upfront {as they do the hardest physical labor on your wedding day, and should be compensated accordingly}. In the event you feel uncomfortable providing the gratuity ahead of time, you can do so at the end of the event {or have your planner/coordinator} provide the gratuity at the close of the event {normally in the form of cash or a check}. Do keep in mind, that while Gratuities are not required, it is in good etiquette to do so.

So there you have it folks. I hope this answers most of your questions on the difference of Service Charges vs Gratuity. Stay tuned for our next Wedding Planning 101 post when we discuss the etiquette of gratuities.

Happy Planning!

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Anonymous said...

Great Topic!

Anonymous said...

So why dont venues just factor in the cost of the staff and services into the actual cost of the event instead of tacking it onto the existing bill as an extra charge. I am paying my venue about 8,000 for our wedding, they are charging a 20% "service fee" on top of it. Honestly i would have no problem if they said they were charging me 9600 with a 20% gratuity but expecting me to pay gratuity on my own accord on top of a service fee of 20% is a little ridiculous in my opinion.

Anonymous said...

They already factor in profit margin with the food, setup fees, and other misc fees. To add a service fee then expect a tip on top of that is just greedy! Don't tell me it's for operating expenses. I have friends in the business and it is pure profit.