Service charge vs gratuity
Updated August 2026
A service charge is a mandatory charge the caterer sets and books as business revenue, covering the cost of running service. A gratuity is a discretionary tip a client chooses to add for the staff who worked the event. They are different charges with different purposes, and industry practice is to show them as separate lines.
Also called: service fee, tip, administrative fee.
Why it matters to a small caterer
Clients conflate the two constantly, and the confusion is expensive in both directions. A client who believes a mandatory service charge went to the servers may decline to tip on top of it. Staff who believe the same thing may expect a share that was never budgeted. Both of those are avoidable by writing on the quote what the service charge covers and whether any of it is distributed to staff.
How service charges and tips are treated for wages, payroll and tax is set by federal and state law, and the treatment is genuinely different between the two. That is an accountant question rather than a copywriting one, and it is worth asking before your first staffed event rather than after your first payroll.
How to write the two lines
Give each charge its own line with a name a client can read. When a line is a percentage, say what it is a percentage of. "Gratuity (18% of food)" beats a bare surcharge, because the client can check it against the dishes above instead of taking it on faith. Delivery and staffing are naturally flat amounts; a service charge and a gratuity are naturally percentages. Keeping them apart also matters because they can be taxed differently depending on the state, so each charge needs its own tax treatment rather than inheriting the food’s.
A short sentence under the service charge does more work than any amount of negotiation later: name what it pays for, whether it is distributed, and that gratuity is separate and at the client’s discretion.
Why hiding it costs more than showing it
A service charge folded into the per-head price makes your food look expensive against a competitor who broke theirs out, and it gives you nothing to point at when a client asks what they are paying for. A client who can see the charge argues with it far less often than one who suspects it.
Where this shows up
Put the terms to work on a real quote
CaterKit costs every dish from your own ingredients, prices the quote at your margin, and sends it as a page the client can accept on their phone.