Service charges vs tips: reading the percentages on your bill
A service charge is a fixed percentage added by the business; a tip is optional and set by you. How to read a bill with both, what the numbers mean, and how to work out an extra tip if you want to add one.
A service charge is added by the business, usually as a percentage of the subtotal. A tip is extra and voluntary. If a $120 bill already has an 18% service charge ($21.60), adding another 18% tip would bring the total gratuity to about 36% of the food. Ask whether the charge goes to staff if that matters to you.
On this page
Some restaurants, hotels and delivery services add a service charge to the bill. It looks like a tip, but it isn’t quite the same thing. Before you add a tip, check what you’re already paying.
Reading the bill
The service charge here is 18% of the $120 subtotal:
Try it: An 18% service charge on $120
Open in calculatorWith 8% tax on the food ($9.60), the total is $151.20.
Service charge vs tip
- Service charge. Set by the business and added to the bill. Often used for large groups, events, room service, or as a standard policy. It may be shared with staff, kept by the business, or used to fund wages, depending on the employer.
- Tip. Chosen by you, after the service. Usually meant for the people who served you.
Because a service charge may not reach staff the way a tip would, some people ask how it’s distributed. That’s a reasonable question to put to the restaurant.
Adding a little extra
If you’d like to add a tip on top, keep it as a separate, smaller percentage of the subtotal. An extra 5% on $120 is $6.00:
Try it: 5% on the $141.60 subtotal plus service charge
Open in calculatorNote that the calculator above tips on $141.60 (food plus service charge), giving $7.08. Tipping 5% on the $120 food subtotal alone gives $6.00. Basing the extra on the food subtotal keeps you from tipping on the service charge.
What the total gratuity comes to
If you add an 18% tip on top of an 18% service charge, you’re paying 36% of the food bill in gratuities: $21.60 + $21.60 = $43.20. That may be what you intend, but it’s easy to do by accident when the receipt has a blank tip line.
total gratuity % = (service charge + tip) ÷ subtotal × 100
Where ($21.60 + $6.00) ÷ $120 × 100 = 23%
Before you sign
- Look for “service charge,” “gratuity included,” or “auto-gratuity” on the bill.
- Check which line any suggested tips are calculated on.
- Decide whether to add anything extra, and base it on the food subtotal.
For working out tips, see how to calculate a tip and tipping before or after tax. Splitting a bill that includes a service charge is covered in splitting a bill with tip.
Questions
Is a service charge the same as an automatic gratuity?
They’re often used for the same thing, a percentage added for larger groups or as house policy, but the wording and who receives the money can differ. The bill or menu usually explains it, and staff can tell you.
Can I ask to remove a service charge?
Policies differ by business and by location. If the charge was disclosed in advance, it’s usually treated as part of the price. If you’re unsure, ask before you order or when you get the bill.
The calculator links in this guide are checked against the PercentSwift calculator every time the site is built. How we calculate explains the rounding rules. If you spot a mistake, email hello@percentswift.com.
