The proper wording depends on how you want to distribute the money collected.
The rules are in place to attempt to give customers some level of transparency in knowing where their money is going. The main point is to avoid letting customers think they are leaving a tip, while the money is actually being kept by the business and not distributed to employees.
If the fee is getting distributed to the employees, the nomenclature is a little less important. For example, if you want to add a 20% fee for large parties and events, you can:
Call it a "service fee" if it will be fully distributed to employees.
- This fee is subject to sales tax.
- This fee will also boost the base pay rate of any employee who work overtime during the applicable work week.
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- EG. ((45 hours X $14.25)+ $100 service fee))/45 hours = $16.47/hr -> $24.71/hr OT rate (rather than the standard $21.38)
- Base pay for the week is recalculated by adding hourly wages to the payout amount of the fee and then dividing by the number of hours worked during the workweek.
- This fee is subject to sales tax.
- Any portion distributed to employees will increase their base pay rate for the pay week.
- This should include a "not a gratuity" disclaimer (see below).
Call it an "employee health care fee" if it will be retained by the house and used to offset the cost of employer sponsored health insurance.
- This fee is subject to sales tax.
- Any portion actually distributed to employees as income will increase their base pay rate for the pay week.
- This should include a "not a gratuity" disclaimer (see below).
"Not a Gratuity" Disclaimer
The best practice, if using any wording other than "service fee" (which we can assume people will interpret as a tip), would be to provide a disclaimer on all contracts, guest checks and menus. This could be as simple as listing the fee and noting next to it the words "Not a gratuity."
If you are just looking to ensure that guests are leaving adequate tips and want to avoid sales tax and overtime pay rate issues, you might be better off indicating a "suggested gratuity" amount on guest checks, rather than adding any kind of mandatory fee.