Lots of inaccuracies on this thread. The facts are Service Charge is taxable income. How much tax is due varies on how the Service Charge is processed. If it is processed via a Tronc, then only PAYE is applicable, so no National Insurance. All employees get an equable split of the charge, so includes chefs, cleaners, kitchen porters, etc. The business does not keep any of it. No VAT is chargeable on it.
The reason so many businesses charge it now, is to give employees more money, without directly increasing higher costs to the customer. If wages to staff were just increased, then the price of food would be increased, not only to cover the wage difference, but to also cover NI & more importantly 20% VAT. So that £5 extra would be over £6 extra and mandatory. When it is discretionary (which it always should be in my option), if service is poor, or you are struggling, then it should be removed with no questions asked.
The other reason is so many people don’t carry cash that traditional cash tips had dropped massively. This was made worse when chains started adding a service charge, so many customers expected it to be included and did not tip at all. The result is more and more venues adding the charge on.
As to why hospitality workers should get it and not other industries is arguable. Someone mentioned that staff don’t get holiday or sick pay, which is incorrect, hospitality staff have to be paid holiday pay and statutory sick pay in line with the law. However, it is arguably a very tough physical job, with long hours, short breaks and unsociable rotas. Most good staff do all this with a smile.
The charge is massively appreciated by hospitality staff, but they usually have no say in whether it is charged or how much it is, so if you don’t want to pay it, then don’t, but please don’t give the staff grief about it.