Surprised by a Restaurant Surcharge?

Restaurateurs say charging fees to cover government-imposed costs keeps both their staffs and their businesses healthy.

Surprised by a restaurant surcharge - Dec/Jan 2022 2023
Closeup woman checking the price of foods on the bill after meal in the restaurant

Wrestling with inflationary and wage costs, a number of Victoria restaurants have been adding a surcharge to their bills to cover mandated health and sickness benefits. And at least one long-time restaurateur isn’t willing to swallow the expenses imposed by politicians.

“For the government to pass that on and expect us to eat it, no,” says Mike Murphy, owner of downtown Victoria’s 10 Acres Farm and Restaurant Group. In February, 10 Acres began adding a two per cent charge for food and beverages to each bill, calling it the EHB (Employee Health Benefits). “I’m really surprised more restaurants aren’t doing this,” Murphy says.

A few blocks away, Belleville’s Diner has been charging a “BCH” on food and beverages since shortly after the provincial government enacted its new employer health tax (EHT). On January 1, 2020, the EHT replaced the old Medical Services Plan (MSP), shifting the financial burden from individuals to businesses.

Employers who pay more than $500,000 in wages in a calendar year must cover EHT and, since January 1, 2022, five days of paid illness or injury leave as well. To cover all that, Belleville’s BCH today stands at nine per cent.

While 10 Acres’ staff have fielded roughly 20 complaints about the EHB, once it’s explained that the surcharge is to pay for employee benefits, customers usually understand, Murphy says.

Others believe the health/benefit costs should be buried in the price of the food or drink. But Murphy says the GST and PST taxes aren’t buried. “Why should we raise our prices to hide government costs?” asks Murphy, who has been in the restaurant business for almost 40 years.

As well, using a surcharge actually deprives the provincial and federal governments of extra PST and GST dollars since the increased costs appear separately and are not rolled into food and beverage charges.

The president and CEO of the BC Restaurant and Foodservices Association believes restaurants should encase the costs within the food and beverage charges. “You need to bake it into the price of the meal,” says Ian Tostenson, adding that having a separate charge can create confusion and leave a bad taste in the customer’s mouth.

Tostenson notes that, in California, many eateries add an eight or 10 per cent surcharge to cover employee benefits and are usually very open about it. “If you’re not, you end up with awkward conversations,” he says. Tostenson does acknowledge that restaurants have to find ways to camouflage costs imposed on them by government, but there are limits. “There’s only so much we can do before there’s $25 burgers,” he says. 

B.C.’s Ministry of Finance maintains that businesses have the right to make their own decisions about setting prices and fees. But if a business does institute a fee, it cannot be called a tax and the fee cannot be hidden. It must be disclosed before a customer orders, according to a Ministry of Finance statement.

For restaurants, any fee would have to be stated clearly on their menu, and the fee must be included in the taxable subtotal where applicable. Such fees may also be subject to PST if they are part of a payment required for taxable goods or services, such as soda or liquor from a restaurant.