Furloughed hospitality workers could lose ‘up to 40 per cent’ of wages
Businesses are seeking legal advice over the government’s job retention scheme amidst fears that millions of furloughed hospitality workers could be denied large chunks of their wages.
The scheme – which sees the government pays 80 per cent of wages up to £2,500 a month to furloughed workers – was rolled out yesterday, with 185,000 businesses already making claims for 1.3m employees.
However, the Treasury has told employers not to include so-called tronc payments – made up of tips, gratuities and service charges – for hospitality staff.
These payments are made through PAYE and are fully taxable, meaning there are detailed records of them, and many of the hospitality sector’s approximately 3m workers rely on this income stream as large part of their wage.
Kate Nicholls, chief executive of industry lobby group UK Hospitality, told City PM that many hospitality workers would now lose out on up to 40 per cent of their wages, because of the Treasury’s decision.
She said many of UK Hospitality’s members were now seeking legal advice on the issue.
“There are a great deal of companies really concerned, particularly in the fine dining and hotel sectors,” she said.
“We’ve been speaking to the government to work out if the scheme can be changed.”
The Treasury’s decision to not include tips and service charge payments in the job retention scheme has caused grief for many hospitality workers.
A change.org petition has more than 14,000 signatures, with a litany of comments from hospitality staff that much of their wage won’t be included in the scheme.
One said it was unfair as “we pay tax on service charge”, while another said “the lion’s share of our wages are made up by customer service charges”.
An accountant who is advising hospitality businesses on the issue, but asked not to be named, said the situation was “a dog’s breakfast”.
They said that some businesses were considering still entering the tronc payments in the job retention scheme portal and risking being caught for fraud.
“There is a lot of fear that workers are going to be surprised when they don’t get their full wage if tronc isn’t included, and then they won’t have enough to pay their bills,” they said.
Julian Cox, head of employment law at City law firm BLM, said the situation left businesses in a tough situation.
“The guidance provided by the government is clear that tips ought not to form the basis of applications for furlough as they form discretionary payments,” he said.
“There is a real risk therefore that as things stand, if businesses do include such payments when making their submissions this may come under scrutiny by HM Revenue and Customs.”
The Treasury was contacted for comment.