Nepal | July 05, 2020

Service charge row drawing to an end

HAN, trade unions plan on settling the dispute while neglecting consumers’ issues

Himalayan News Service
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Kathmandu, March 21

The hoteliers and trade unions of hotel and restaurant workers are close to resolving the service charge dispute as per their mutual benefit while ignoring the consumers’ issues.

The dispute of 10 per cent service charge is going to be settled soon as both the management of hotels and restaurants, and trade unions showed flexibility towards each other in reviewing the share structure of service charge levied on consumers unnecessarily. Sources at both sides — trade unions and hoteliers — have confirmed that they are close to resolving the issue with a win-win for both parties.

The Hotel Association Nepal (HAN) has been negotiating with the leaders of agitating trade unions to sort out the issue since two-and-a-half months and another talk is scheduled for Thursday.

Since hotels and restaurants started levying service charge in the bill following mutual consent between management and staffers in December 2006, the two parties have been sharing the service charge in a ratio of 68 and 32 per cent, respectively. However, the service charge which was introduced back then had no legal ground and the Supreme Court also had issued a verdict to the government to frame a law to regulate the service charge issue. However the verdict of the apex court was neglected as the management and staff members of hotels and restaurants bulldozed with their agreement, with consumers at the receiving end.

A consumer has to pay 24.3 per cent — 10 per cent service charge, 13 per cent value added tax and 1.3 per cent VAT amount of the service charge — on top of the advertised bill for obtaining service from hotels and restaurants. The service charge was introduced after the hotels and restaurants were having a hard time in sustaining when tourist inflow remained stagnant during decade-long insurgency and political transition.

The hoteliers and restaurant operators decided to levy service charges on the condition that the management would not review the salary of the staffers every year and for enhancement of quality of services. While signing the agreements, HAN and Restaurant and Bar Association of Nepal (REBAN) had also agreed that the sharing structure of the service charge would be revised every three years through a task force comprising members from both sides, according to Surya Bahadur Kunwar, president of Nepal Independent Hotel, Casino & Restaurant Workers’ Union (Central Committee).

However, HAN, REBAN have not revised the sharing structure of service charge stating that the workers have not stuck to the agreement and push for raising wages every year through collective bargaining.

Binayak Shah, secretary general of HAN, said that the staff expenses hover around 35 per cent of the total operation cost, which is high against the ideal 15 to 20 per cent.

Then three months ago, the trade unions started to protest demanding that they should get the entire service fee.

In all this, however, both the sides have ignored the consumers’ issues and have been enforcing the service charge mandatorily ignoring the verdict of the apex court. In reality, such charge is supposed to be on a voluntary basis as per the discretion of the consumer.

Many countries, including India, that had introduced service charge as mandatory have already reverted back to making it voluntary.

A version of this article appears in print on March 22, 2017 of The Himalayan Times.

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