The workers with hidden losses from the coronavirus refund scheme

6 May 2020

Workers slip through the cracks of the government furlough system

Image

Furloughed hospitality workers in the UK could be missing out on up to half of their income due to little-known exclusions in the coronavirus job retention scheme. 

Currently, the government initiative allows employers to apply for a grant that covers 80% of their employees' usual monthly wage costs, up to £2,500 a month. 

However, the scheme does not include tips, including 'tronc' payments - a system used to distribute service charges among staff.

Cash received through the tronc system can make up 50% of hospitality workers' income, who are often on minimum wage. 

Those working in hospitality were already among the worst affected by the coronavirus crisis even without the issue of missing tronc cash, according to recent research.

One anonymous worker at a Soho restaurant and bar says tronc payments make up around 26% of his normal income, and that up to 80% of hospitality workers receive this money.

"Usually I would be able to pay my rent, bills and other costs with money spare to save, but now I am £50 short on my rent even before getting to the rest of those payments," he says.

"I have been forced to dip into my savings, which are now depleted, and have had to borrow money from my family just to live."

For many hospitality workers, tips and tronc payments are a guaranteed amount of their income and not a variable, meaning these are considered part of their hourly rate, not a bonus.

‘These earnings are regular and needed for our staff to pay their bills.’

One restaurant chain boss,Des Gunewardena, is calling on the government to change the furlough rules.

Gunewardena is chief executive of D&D London, a restaurant group that employs 2,000 staff.

Employees at the chain’s UK restaurants, including Quaglino’s, Bluebird and German Gymnasium, are receiving far less than their normal income under the furlough scheme.

 “Our UK employees are receiving, under furlough, even with the addition of universal credit, only some 50% of their normal wages,” says Gunewardena. 

Workers in other countries have been able to recoup a higher proportion of their income because their governments had more generous schemes.

"In the US the FED stepped in to add $600 per week to the standard 50% of earnings (including tips) to improve average New York waiters’ earnings to close to 100%," says Gunewardena. 

His employees in Paris were also able to recover larger amounts of their total income. 

He continues: "In France unemployment benefit was already relatively generous, but the government improved the 75% salary offered to be based on a 39 hour not a 35 hour week. So our staff receive 85% of normal earnings."

In a letter to the Chancellor, Gunewardena called for the government’s exclusion of tronc payments to ensure that hospitality workers are protected.

“The exclusion of service charge from furlough earnings appears to be an unfortunate anomaly that will affect hundreds of thousands of workers in UK restaurants.This is deeply unfair, discriminatory, and sends a clear message to restaurant staff in the UK that they are not valued,” he says.

What does HMRC say?

A spokesperson from HMRC says: “The Coronavirus Job Retention Scheme is absolutely vital to protect jobs. 

“It is one part of a raft of unprecedented measures to support our economy through these challenging times.

"This includes targeted support for the hospitality sector with business rates holidays, VAT deferrals, eviction protection and over £8.6 billion worth of cash grants so far to hundreds of thousands of businesses.”

Comments

Savings

"Forced to dip into savings" seems a bit strong ... we all have to think and re-think income : expenses.
And isn't the purpose of savings to help you get through bad times, not just to enhance the good?
When the going is tough, we can't necessarily expect someone else to bail us out?
Have we done away with the saying "saving for a rainy day"?

Hospitality workers and mr Gunewardena

Then perhaps Mr Gunewardena should pay his staff properly instead. Of just reaping all the profits ,if they get it anyway why doesn’t he just pay them decent to start with ?in my opinion tips service charges etc should never be counted or relied upon as income, as you never know how many customers are going to come through the doors , sorry mr Gunewardena the book starts and finishes with you .pay your staff a decent wage. And stop forcing them to rely on tips and service charges .

At least Mr G is trying to…

At least Mr G is trying to do something by writing to the Chancellor. What are all the other restaurant owners doing? Agreed, though, it's high time to get rid of the demeaning and unpredictable system of tipping

mr Gunewardena

I think for a CEO to take the time to write to the Chancellor shows that hes concerned about the wellbeing of his staff - good on him.

furlough for high risk workers

I have been told I can't have furlough even though I have had a letter saying I am high risk. My employer says furlough is only for companies suffering a loss of business during the crisis and will only pay me SSP. Is this right? I have self isolated as I was advised to by the government.

Add new comment