Before deciding who gets what, planners need to understand what is already included in the contract.
Tip
A tip is generally voluntary. The IRS describes tips as discretionary payments determined by the customer. That means the customer typically decides whether to give the payment, how much to give, and who receives it.
In event terms, a tip is usually an extra thank-you for direct service or exceptional support. Think banquet staff, setup teams, AV technicians, bartenders, bell staff, or a venue contact who went above and beyond.
Service Charge
A service charge is different. It is usually mandatory and automatically added to the bill. The Department of Labor notes that compulsory service charges are not tips under the Fair Labor Standards Act. If those charges are distributed to employees, they are treated as wages, not tips.
This matters because a planner may see a 22%, 24%, or 25% service charge and assume the staff has been tipped. That may not be true.
Tripleseat notes that service fees may cover operational costs such as setup, breakdown, venue maintenance, coordination, and administrative work. In other words, a service charge may support the event operation, but it may not go directly to the people serving the meal, flipping the room, or rescuing your breakout session from projector chaos.
Gratuity
Gratuity is where things get slippery. In everyday hospitality language, “gratuity” often sounds like money intended for staff. But when it is automatic or mandatory, it may function more like a service charge from a tax and labor standpoint.
The planner-friendly rule is simple:
Do not trust the label alone. Ask how the money is distributed.
A line item called “gratuity” may not work like a voluntary tip. A line item called “service charge” may or may not benefit staff. The safest move is to clarify it before the contract is signed.
