The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The hotel industry fears that proposals to include gratuities in the Employment Act’s definition of wages will have an “astronomical” impact on its cost base, and could drive some properties “out of business”.

Robert Sands, president of the Bahamas Hotel and Restaurant Employers Association, told Tribune Business that the sector was “very concerned” about the proposed changes, and had expressed its views to both the Government and Chamber of Commerce.

Should the Christie administration move forward with the gratuity (tips) amendment, Mr Sands said it would have a “tremendous compounding” effect on benefits for many of the sector’s employees.

Combined with the recent minimum wage increase to $210 per week, which had increased labour costs for certain hotel worker categories by between 15-30 per cent, and the current “trading environment” facing the sector, Mr Sands warned some hotels may not survive a further increase in their cost base.

“We’ve made an intervention as an industry on that particular point with the Minister of Labour,” Mr Sands confirmed to Tribune Business.

“We have put our position in writing to the Minister of Labour on that, and the Tripartite Council. We have used the vehicle of the Chamber of Commerce, who are the private sector’s representatives on the Council, to express our concern that gratuities should not be included as part of the definition of wages.”

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, who is one of the private sector representatives on the Council, said the gratuities issue is set to be discussed by the body next week.

“This is a matter being presented at a National Tripartite Council meeting next week,” Mr Sumner told Tribune Business. “Coming out of that, we will have the Tripartite Council make its recommendations to the Government.”

He expected the issue to consume much of the meeting’s agenda, but said the Chamber had a position that it would present on the matter, and was “making progress in dealing with it” to the private sector’s satisfaction.

The Bahamas Hotel and Restaurant Employers Association teamed with the Bahamas Hotel and Tourism Association (BHTA), Bahamas Out Island Promotion Board and the Grand Bahama Island Tourism Board to make its views known to Shane Gibson, minister of labour and immigration, on May 24, 2016.

The BHTA’s July 2016 newsletter added that the industry was set to provide the Government with “more detailed information outlining the potential impact” of the proposed Employment Act changes, although it is unclear if this has yet been sent.

“The difficulty is that in our particular sector, gratuities are already a significant proportion of the sector’s remuneration,” Mr Sands explained, “and the compounding of that particular element on total benefit costs would have a tremendous impact on many, many companies in terms of accrued benefit costs.”

Gratuities (tips) form the bulk of worker income in many hotel industry employment categories, and Mr Sands said the “compounding” effect of including them in the definition of wages would dramatically increase the vacation pay, redundancy pay and sick pay staff are entitled to.

He added that the proposed Employment Act change was following swiftly behind, and on top of, the recent minimum wage increase. Given that many ‘tipped’ employees’ base salaries are at or near the minimum wage, hotel labour costs rose then.

Mr Sands confirmed that “the industry has absorbed a significant increase in terms of the minimum wage rise”, which boosted the earnings of employees who were “already receiving significant gratuities.

“The increase in minimum wage has impacted various companies with anywhere from a 15 per cent to 30 per cent increase [in labour costs] across different worker categories,” the Bahamas Hotel and Restaurant Employers Association chief said.

“Obviously, this [gratuity]increase will have a compounding impact in terms of benefits. When you add that in with other factors, the compounding impact of that is astronomical, and may put some companies out of business.”

He implied that the issue was not necessarily the proposed treatment of gratuities by itself, but the combined impact of this together with the recent imposition of Value-Added Tax (VAT) and other costs, plus the continued mediocre business climate facing the Bahamian hotel industry.

“It’s something that we have to be very concerned about,” Mr Sands told Tribune Business of the proposal to include gratuities in the definition of wages, “especially in a trading environment that is not growing as robustly as we’d like it to grow.

“At this point in time we have increased competition in terms of rooms available in the destination. The Marriott Courtyard (former Nassau Palm) has come online, the Warwick is about to come on line, and Baha Mar will come on line at some point. All this will have an impact on the trading environment in the short-term.”

“We have to be concerned,” Mr Sands continued. “We are price sensitive to the trading environment we are in. While there has been some daylight in trending down of utility costs, they’re still not at the level we need them to be.

“VAT has taken some of the slack, as now it is on most items in our sector.”

Previously, the hotel industry only faced a room occupancy tax of 10 per cent. Now, the 7.5 per cent VAT has been added to virtually all its products and services, broadening the tax burden it faces.