London retailer Fortnum & Mason is attempting to persuade its workforce to accept a cut in basic pay in return for a share of tips in a move that will help reduce its tax liabilities.<\/p>\n
The retailer currently does not share with staff any of the 12.5 per cent service charge automatically added to bills paid by diners at its Heathrow bar.<\/p>\n
The firm, which recently announced a 27 per cent rise in pre-tax profits to 6.2 million in the year to July, will consult with 20 of its bar staff on introducing a so-called \u201ctronc\u201d system.<\/p>\n
Under this system, the 12.5 per cent service charge would be shared among workers \u2013 but only if they agree to take a big cut in basic pay.<\/p>\n
Cutting basic pay would limit National Insurance Contributions for both Fortnum & Mason and its employees.<\/p>\n
Information sent to members of staff show that they would receive a near 11 per cent cut in basic pay, taking them down to the National Minimum Wage (NMW) of \u00a37.20 per hour.<\/p>\n
It does not show what proportion of the total service charge paid voluntarily by customers would be shared by workers, Fortnum\u2019s, or a firm called WMT Troncmaster Service that will run the tronc system.<\/p>\n
It does, however, make clear that payments are not necessarily guaranteed.<\/p>\n
Last year, the same changes were made to nearly all of the 250 staff working at Fortnum & Mason\u2019s caf\u00e9, bar and restaurants.<\/p>\n
Matthew Brown, technical officer for the employment taxes subcommittee at the Chartered Institute of Taxation, said payments via a tronc system operated completely separately from the employer were not liable for national insurance.<\/p>\n
But as service charges are usually set and controlled by the employer it might be difficult for them to prove they had no involvement in the scheme\u2019s operation, he said.<\/p>\n
\u201cThere are a lot of savings to be made if this can be done right. I would be surprised if this wasn\u2019t challenged by HMRC,\u201d Brown added.<\/p>\n","protected":false},"excerpt":{"rendered":"
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