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MPs Join Restaurants in Fight Against ‘Extraordinarily Discriminatory’ Furlough Policy

Excluding service charges from furlough payments is hurting restaurant workers, but MPs and action groups are fighting to change it

UK - London - Waiter carrying half a table In Pictures Ltd./Corbis via Getty Images

21 MPs have joined the restaurant industry in pressuring the government to revoke its controversial decision to exclude service charge payments administered through tronc systems from the Coronavirus Job Retention Scheme (CJRS). The scheme, extended this week until October, sees the government pay 80 percent of furloughed staff wages up to the value of £2,500.

Current rules mean that employers are only able to submit applications which include restaurant workers’ base salaries; service charge supplements on income, on which staff are typically liable to pay tax, and which can make up a significant portion of their monthly wage, cannot be included. One high-profile restaurateur has called the policy, which would result in many workers in his restaurant group receiving as little as 40 percent of their income while furloughed, “extraordinarily discriminatory.”

Following a letter signed by members of the industry and sent last week to chancellor Rishi Sunak, which outlined why they believed the government’s decision was based on a misunderstanding of how tronc payments to restaurant staff were taxed, efforts to persuade the government to reconsider its policy have continued this week. Managing director of tronc and payroll services provider WMT, Peter Davies, who authored last week’s letter, is now coordinating a campaign to urge members of parliament to speak out publicly in support of those in hospitality who are set to lose out.

Davies maintains that tronc-administered credit card tips and service charge payments should be included in furlough pay calculations because they are, in the majority of cases in restaurants, a component of worker’s taxable income. “These are regular payments — credit card tips or service charge [payments]” — processed by company payroll and “declared to HMRC and taxed,” Davies told Eater London. There is no credible reason he can see for their exclusion from wage calculations in applications for furlough payments. He, like others, draws the comparison with the rules for the self-employed — taxi drivers, for example — who are permitted by the government to include supplementary earnings (tips) in their declaration of business profits, on the basis that those earnings have been taxed. That the same rules are not being applied to those in hospitality was “wholly inequitable and unfair,” Davies said.

What’s more, Davies points out, since all legitimate tronc systems are operated through restaurant payrolls and therefore declared to the government’s tax office (HMRC), the office processing furlough applications already has all the information relating to which workers have paid tax on earnings outside of their base salary. Davies’ point is that one of the only reasons the government has to justify the exclusion of tronc from its furlough policy is that those earnings may not have been taxed. But because HMRC is in possession of that information, it could easily verify claims to accurately identify those which were or were not valid.

Davies believes that the best way to effect change in government policy is for more MPs to make representations and lobby the chancellor for clarity in favour of hospitality and the approximately 750,000 workers in the U.K. who receive part of their earnings through tronc. Since efforts began on this front at the beginning of the week, Davies has noted 21 MPs — across the three main parties — having publicly spoken out. They so far include Labour’s Bell Ribeiro Addy, Dawn Butler, and Jon Cruddas; Conservative members Steve Baker and Chris Grayling; and Liberal Democrat Sarah Olney, among others. Davies is encouraging constituents who work in hospitality across the country to write to their MP, urging them to make a representation for what he refers to as “fair furlough.”

Davies believes the chances of it being reconsidered are “pretty good,” emphasising that “everyone needed to get together on this,” that MPs were becoming more aware and had better understanding of the issue, and that when compared to what the government was set to pay out to workers in all sectors under the furlough scheme, amending it to include tronc additions was comparatively insignificant.

Ultimately, it would become a political question for the chancellor, Davies believes. “If enough MPs, particularly from the [governing] Conservative party speak out [and say] this is causing real financial hardship,” for their constituents, then the government would find it increasingly difficult to resist political pressure and an accompanying shift in public opinion. The restaurant industry is not going to let up on this issue any time soon. While maintaining cautious optimism and having built momentum this week, Davies said, “it is our best route to success.”