This is hugely, hugely, amusing

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.

15 thoughts on “This is hugely, hugely, amusing”

  1. The girls who work in the Massage salon do very nicely out of tips for their services and will be unaffected by any changes

  2. Isn’t it imperative that someone authoritative on matters of tax castigate Lord Ashcroft for this shameful and immoral distortion of what should legally be due to the exchequer?

    I expect Noel to take this up in the proper quarters…

  3. I’m sure all the Grauniad hiring & renumeration and tax practices are completely above board and so they can throw stones in the glasshouse.

  4. Bloke in North Dorset


    Not quite, but it is a way of getting one of those title thingies.

    AIUI, in the US you call them Ambassadorships or something similar.

  5. I hate the whole tipping thing. The bill is the bill, there’s no ‘service’ element. Staff get paid adequately. That’s it.
    Japan has marvellous service everywhere you go and no tipping.

  6. Close but not quite Tim. For PAYE purposes and definitions a tip is an amount added voluntarily by a customer where the customer decides the amount. A service charge is an amount added to the bill by the restaurant. A service charge may be compulsory but it may also be discretionary. Now, IF it is made clear in the wording on the bill that the service charge is discretionary AND the service charge is distributed by a Tronc Master then no NIC is due.


  7. You got the discretionary/compulsory bit but missed that this does not decide whether it is a tip or a service charge.

    That depends on whether the customer or restaurant decided on the amount.

  8. Bloke in Costa Rica

    MC: I tip because restaurant work is shitty, I like eating and I make ten times what a waiter does. It’s fair dos.

  9. I also make damn sure I’m friendly and polite to waiting staff: partly for the reasons given by BiCR above; and partly because I’m not keen on eating food that’s been gobbed in (or worse!)

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