Can we avoid service charges (tips)? – T.K. Chua

What do you think of Deputy Finance Minister Ahmad Maslan’s reminder that “you don’t have to pay the 10% service charge if their [restaurants’ and hotels’] service is not good?”

On the surface, the advice sounds harmless and logical. These are service charges, i.e. tips, for good services rendered. Rightly, tips should be based on discretion, with more being offered if customers are happy or satisfied with the service. 

But service charges in Malaysia have become part of the hotels’ and restaurants’ revenue a long time ago. For years customers were made to pay as part of the bills. Can we ever dine in a restaurant or stay in a hotel by stating beforehand we are not going to pay the service charges?

Because of GST, the Deputy Finance Minister is now telling the consumers they have the option to pay or not to pay. This is looking at the problem in the most simplistic and naïve manner.

Whether we like it or not, the service charges (tips) have become part of the income of employees in restaurants and hotels. If restaurant and hotel owners have pocketed the tips, then they have become part of the price to generate the desired income or profit.

There is no free lunch; something must give. The Deputy Minister is trying to placate the impact of GST by asking consumers not to pay service charges. Do you think restaurants and hotels are going to accept this uncontested?

This is what I foresee. If customers were given a choice, they will most probably not pay the service charges. Even if some are willing to pay, the amount will be unpredictable and most likely less than the current 10%. But service charges have already become part of employees’ income or part of owners’ revenue/profit. If service charges are abolished or are based on customers’ discretion, I think most restaurants and hotels would incorporate the charges into their pricing.   

So, it is back to square one. I don’t think consumers can avoid paying either service charges or higher prices after the implementation of GST. Worse still, service charges are also subjected to GST.

May I urge the Deputy Minister to think through the problem before issuing a statement. Can we imagine the havoc it is likely to cause at restaurants and hotel when customers haggle over to pay or not to pay the service charges?

* T.K. Chua is a reader of The Malaysian Insider.