The Hotel Association of Nepal (Han) and Nepal Tourism and Hotel Labourers Association have ended a two-year-long dispute over sharing of service charges raised from consumers. 

As per the new share structure, hotel employees will get 72 percent, hotel management will get 23 percent, Han will get 2 percent and three trade unions affiliated to the Nepali Congress, the CPN-UML and CPN (Maoist Centre) will get 1 percent each. The CPN-UML and CPN (Maoist Centre) have merged to form the Nepal Communist Party (NCP) in May.

The two sides are scheduled to sign the agreement over the new tips sharing modality on Friday.

Currently, 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. “The dispute has been resolved after two years. We expect that the deal will strengthen employer and employee relations in the hospitality industry,” said Binayak Shah, general secretary of Han. According to him, the share allocated for the three trade unions would be utilised for capacity building of the workers associated in the hospitality industry. According to Han, service charge collection 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.

However, three tourism and hotel labour associations last year had demanded that the staff should get the entire amount collected from service charges.

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). From the customers point of view, the service charge issue, however, has raised lots of questions. A number of hotels have said that the 10 percent service charge added to the bill cannot be made mandatory and it was time to scrap the system because it was the customer’s discretion to pay or not.

The Indian Department of Consumer Affairs had last year announced that ‘service charges’, which restaurants include in the bill in addition to taxes, are actually optional and not mandatory.

The department had 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.