Labor and service fees do NOT include tip. Nothing goes to servers aside from hourly rate unless your bill specifically says “gratuities”. I work for the top catering companies in NYC and Los Angeles, and can state this as fact. Unless it says gratuities have also been added, labor and service are not tip as well.
As for what they are charging you for:
most companies offer employees pay based on experience. Runners, Servers, Bartenders are paid based on experience, not based on position. Captains are the only ones who get paid differently based upon position.
Kitchen staff is the same. All KAs start in the same range based upon experience. But chefs get paid more.
But your labor cost is paying the salaries of the staff members AT your event.
Be aware that your service charge is not based upon whats happening that day of your event, but everything leading up to your event. You have no idea how much goes into prepping for an event. You have ordering, shopping, then prepping everything (which usually takes an entire staff of 5-10 people 1-3 days to cook and prep your food, based upon the size of your event), prepping the packing list of what needs to go in the truck, then packing the truck, unloading the truck at the event, then post event, cleaning out the truck, cleaning all items used, restocking items, electricity, etc. Then, if they are arranging a deal on your rentals, which is common, such as plates, flatware, glasses, etc, someone coordinates that and negotiates those contracts as your numbers fluctuate and such.
All that goes into your service charge.
If you had a general tip to the entire bill, everyone gets tipped, from the person at the office who coordinated your catering and rental needs, to the kitchen staff who prepped your event, to the truck loading and cleaning guys, to the staff at the actual event. So if you left a tip and meant for 5 servers, 2 bartenders, and 3 kitchen staff to each get $20, which would be $200, just know that in reality, due to the number of people who worked your event, the service staff and kitchen staff who were on site that day might get $5 of that. Also note that catering companies make most of their money on staffing. So you may be getting charged $30/hr for staff, but that server could be making as little as $12 from it. So it IS appreciated.
I have also been tipped on site instead of with my paycheck meaning they didnt add it to the bill (your quote will tell you how many staff members you have, and in what positions they are in). These usually get dispersed in white envelopes and the catering captain or manager disperses it on site. This way, you can control who gets tipped and how much.
I would say, probably 5 of every 75 events I do a year do I get tipped as a captain/server. Which is the “not expected but appreciated” aspect.
Send me a note and I can help you more specifically with what they are offering you. Chances are, I probably currently work for, orpreviously worked for, the company, and tell you what they normally do. I won’t tell you insider business operation things because thats part of confidentiality clauses staff members sign, but I can certainly help lead you in a direction based upon what I’ve seen that company do.