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Fair Tips, Fair Pay? Not in a Recession.

Fair Tips, Fair Pay? Not in a Recession.

Andrew Grice and Cahal Milmo | The Independant

August 18, 2009

Restaurants say 45,000 jobs are at risk if waiters’ pay law is changed.

The restaurant industry is warning that 45,000 jobs could be cut unless the U.K. government delays plans to outlaw the use of tips to “top up” below-minimum wages.

After The Independent’s “fair tips, fair pay” campaign, ministers pledged last July to stop restaurants from using tips and service charges to bring pitiful wages up to the £5.73-an-hour legal minimum. This campaign uncovered evidence that some workers were paid as little as £3 an hour. Some of the restaurant groups are owned by wealthy private equity firms and they were accused yesterday of using the recession as an excuse to stave off paying their employees fairly.

The hospitality industry warned the Government that 45,000 jobs will be at risk if “topping up” is made illegal. The new rule was due to take effect this October but the industry is lobbying for a delay. Some insiders blame its campaign on private equity firms who rely on restaurants to maintain their cash flow.

While many restaurant groups have dragged their feet on changing their tipping policy, their parent companies have reaped handsome rewards. Tragus Group, which controls the Cafe Rouge, Bella Italia and Strada chains, and is one of Britain’s largest restaurant operators, is understood to be lobbying the Government for a delay of several years before implementing the new policy.

The company is 81 per cent-owned by the American private equity giant Blackstone and recorded a 56 per cent rise on its pre-tax profits last year to £44m on earnings of £248m. It confirmed last year that it dips into the gratuities earned by its staff to bring their earning up to the minimum wage.

Tragus paid one of its directors £325,000 last year – a 128 per cent increase on the previous year. Stephen Schwarzman, the chief executive of Blackstone, last year received a remuneration package including stock and shares worth $729m (£689m). The average salary in Tragus restaurants was £10,855 a year.

Gondola Group, which is owned by the private equity company Cinven and controls chains including Pizza Express, ASK and Zizzi, reported a 7 per cent rise in pre-tax profits to £103m last year.

The Independent revealed that staff at Zizzi and ASK restaurants had used those tips left on credit cards to make up their earnings to the minimum wage, while Pizza Express workers received the gratuities on top of their earnings subject to an 8 per cent deduction for “administration costs”. Both practices are perfectly legal at the moment.