Staff at an exclusive private members’ club co-owned by the Tory donor Lord Ashcroft have been asked to take a cut in their basic pay in return for a share of the service charge, in a move that could leave low-paid workers vulnerable while reducing the company’s tax payments.
Workers at the Devonshire Club in London, where members pay £2,400 a year for access to a 68-room boutique hotel, brasserie and champagne bar, were asked last month if they would take a formal cut to the legal minimum wage.
They were promised that their total pay would be topped up to the current level using money from the service charges automatically added to customers’ bills and distributed via a system called a tronc.
The scheme would potentially cut the Devonshire Club’s tax bill as, unlike basic pay, national insurance payments are not levied on independently distributed tips.
Although staff will save on national insurance in the short term under the scheme, cutting their contributions will affect statutory protections such as redundancy pay, maternity or paternity pay, or the state pension. Money from a tronc also cannot be included in staff contracts, potentially leaving staff vulnerable to a pay cut.
If the amount must be paid – if it’s not a tip therefore, but it is a service charge – then NI is payable on the distribution.
If it really is a tip, not a service charge, then the management don’t get to decide upon the distribution, the money already belongs to the staff.
The basic set up just doesn’t work.