Hotel Association Nepal (Han) and the Nepal Tourism and Hotel Labourers Association have again locked horns over sharing the 10 percent service charge which hotels and restaurants add to the bill.

The service charge collected from customers is divided between the employees and management. As per an agreement signed in 2006, employees get 68 percent and management gets 32 percent.

Currently, three tourism and hotel labour associations have demanded that the staff should get all of the amount collected as service charges.

A joint struggle committee of the associations has threatened to launch a stern protest from February 12 if their demand is not addressed.

“The concerned authorities will have to take responsibility for any harm caused to the tourism industry from the protest,” the committee said in a joint statement. 

Han, the umbrella body of hotels and restaurants, said on Sunday that it was unable to fulfil the demand of workers. “Hotels and restaurants are required to collect a service charge ‘forcefully’ from consumers. We have no right to collect a service charge when consumers are not satisfied with the service, but we are being forced to do so,” said Han President Amar Man Shakya on Sunday.

He added that collecting a service charge was made mandatory 10 years ago in a bid to narrow differences between hotel management and employees at a time when their dispute was at a peak.

The mandatory service charge system came into force on January 1, 2007. Since then, hotel and restaurant customers have been paying 24.3 percent extra on top of the advertised prices as 10 percent compulsory tip and 13 percent value added tax (VAT).

“Normally, most customers do not want to pay a service charge as they are not satisfied with the service of the hotel or restaurant,” said Shakya. “Consumers are forced to pay a service charge while hotels and restaurants are forced to collect it regardless of the kind of service provided to them.”

Han and the agitating unions are scheduled to hold negotiations on Friday to seek an amicable solution. The service charge issue has raised lots of questions. The Indian Department of Consumer Affairs has recently announced that ‘service charges’, which restaurants include in the bill in addition to taxes, are actually optional and not mandatory.

The department has advised hotels and restaurants to display notices at appropriate places on their premises that service charges are discretionary or voluntary, and can be waived if a consumer is dissatisfied with the service.

“Obviously, it’s a big question in Nepal as well,” said Yogendra Sakya, former president of Han. “It has created confusion in its objective.” He added that the 10 percent service charge automatically guarantees that workers get extra money, so they make no effort to improve services.

“Consumers are not happy. We have been receiving complaints that they have to pay service charges even when they are not satisfied with the service.”

A number of hotels have said that the 10 percent service charge added to the bill cannot be made mandatory and it’s time to scrap the system.

Attempts by the Post to contact the union leaders were not immediately successful.