Ritz-Carlton boss says impact of tips underestimated
The minimum wage will have a “significant impact” on the Cayman Islands’ hospitality industry and could ultimately force prices up, according to a leading hotelier.
Marc Langevin, general manager of The Ritz-Carlton, Grand Cayman, believes the recommendations do not go far enough in making a distinction between workers who earn tips and those who do not.
The Minimum Wage Advisory Committee has recommended a $6 an hour minimum for workers who do not get gratuities and $4.50 for those who do. Mr. Langevin said he had no problem with the $6 rate.
The hotelier, also the Cayman Islands Tourism Association representative for the hotel industry, said he was pleased that the committee had consulted with the industry and recognized tips as part of the equation.
But he believes the recommendations have not adequately considered the importance of gratuities. Other industry figureheads also welcomed the division between tipped and non-tipped labor, though some questioned how effectively the limits would be enforced.
Lemuel Hurlston, chairman of the Minimum Wage Advisory Committee, said the committee had “agonized over any element of gratuities being included.”
He acknowledged that setting a mark for the restaurant and hospitality industry was complex and had been one of the more challenging aspects for the committee. He said it would have to be closely monitored, if implemented.
Mr. Langevin estimates the decision could add between $500,000 and $1 million a year to the wage bill at The Ritz-Carlton, much of it going into the pockets of the highest earners at the hotel. The hotel employs around 800 people, with more than 200 likely to be affected by the decision.
Mr. Langevin said the banquet and restaurant business relies on a high volume of employees, some of whom he said earn up to $60,000 a year, when tips are included, despite very low base wages.
“It is going to cost us a lot of money on the department that needs it the least,” he said. “Food servers in our hotel are making $15 to $30 an hour.
“By forcing a minimum wage, even at $4.50 an hour, you are increasing the wage for the people that don’t necessarily need it. They are the ones that make the most money in the hotel.
“It is counterproductive right now. It is going to have a very significant impact.”
He said he was grateful that the report had acknowledged some distinction for tipped labor.
But he said he hoped there could be further discussions, before the law comes into force.
“I hope that it can be re-evaluated and that there is still some flexibility again in understanding the gratuity part of it.
“My frustration is the disregard of the economic model of the hospitality industry.”
He added that gratuities were included as part of the calculation in determining the hotel’s pension contribution requirements to its staff and should therefore be properly considered in the wage calculation.
He said there would not be job cuts at the hotel, which is one of Cayman’s biggest employers, but acknowledged the pay increases may have to be paid for through some price increases.
“Cutting jobs is not the solution; we still need to serve our customers. We will have to figure it out and reorganize.”
Markus Mueri, of the NM Ventures restaurant group which includes Deckers and Karoo, said he was pleased that there had been a consideration of the difference between tipped and non-tipped labor. He said, “A lot of the restaurants pay this rate right now. I can live with it,” he said.
He said good servers in Cayman restaurants are making substantially more than minimum wage.
“The service industry has a lot to do with side tips. You give exceptional service, you get exceptional tips. That is what the game is all about.”
He added that enforcement would be the key issue as to whether the law had any impact.
“Is it one law for Seven Mile Beach and one law for everywhere else? We have a lot of beautiful laws, but when it comes to enforcement, what happens?”
He said, overall, he was impressed with the report, and congratulated committee chairman Mr. Hurlston on a job well done.
Julie Allan, who runs Rackams bar on the waterfront, said, “I think they definitely made the right decision in separating tips. All my servers already make that wage and a lot more in tips.
“We always treat our staff well,” she said. “They work hard and everybody’s happy.”