The proposed phasing out of gratuities to supplement a lower minimum wage within the hospitality industry has been met with protest from industry leaders who say the changes will further burden struggling businesses.
On Monday the Minimum Wage Advisory Committee released its report proposing a new minimum wage of $8.75-an-hour and a phasing out a loophole that allows hospitality businesses to use gratuities for up to 25% of their employees wages.
Under the proposed changes hotels and restaurants will be allowed to pay a lower rate of $6.56-an-hour with the rest made up by gratuities. But the allowable gratuity contribution will drop by 5% annually for the next five years.
The committee held a press conference Wednesday to address concerns and explain its position.
Disappointment over grats position
The Cayman Islands Tourism Association, in response to Cayman Compass queries on the proposed wage changes, said while it played an “active” role in the committee it was “disappointed in the recommendation to phase out the gratuity contribution to minimum wage for Approved Gratuity Schemes over the next 5 years”.
It added, “CITA is in full agreement with an increase in the minimum wage to create more equitable and practical compensation to low income workers.”
CITA vice president Wendy Moore represented the association on the Minimum Wage Advisory Committee.
Marc Langevin, general manager of The Ritz-Carlton, shared CITA’s concerns.
“I understand that the minimum wage needs to be adjusted to the cost-of-living increase, but it is just disappointing that in their report, the committee picked arbitrarily on our industry by removing the gratuity component in the calculation of the wage while allowing a reduction for other categories which are more at risk,” he said.
Langevin previously noted that employee gratuities are reported to the labour department.
“It is evident that none of our employees’ compensation is below the poverty level. Despite the data shared, the committee decided to ignore the facts in their recommendations,” he said.
Restaurateur Markus Mueri also joined in support of CITA’s position on the recommended changes, saying he would withhold further comment until government articulates its position.
Luigi Moxam, owner of Cayman Cabana and Thatch and Barrel, said he needed to review the full report before commenting.
‘Catastrophic’ implications
In CITA’s submission, called a minority report, included in the Minimum Wage Advisory Committee’s final report, which was released in October, it registered its concerns with what it called “the continuous and overarching bias against tourism-dependent businesses and the gratuity-earning pay structure that is both universal and has been a precedent in the Cayman Islands for over 30 years”.
In that report, the association said while it was encouraged by the return of tourism post-COVID, it noted that the government-imposed travel restrictions were only lifted in August 2022.
“Our industry can ill afford additional financial hits as it will take years for the sector to recover from the 2.5 years of devastation created by the shutdown of our industry during the pandemic. A minimum wage increase without maintaining the current gratuity contribution structure would be catastrophic to our sector,” it contended.
CITA argued that the removal of the gratuity component will be hugely disruptive to the service industry.
“Businesses will be forced to increase basic wages, reduce staffing levels, and recreate their business models. Many will not be able to absorb the increase, leading to loss of employment for some and business closure for others,” it added.
It suggested that a few bad business operators should not be able to adversely impact an entire industry and that fixing this was more an enforcement issue.
“Given the severity of the implications to this industry, it is critically important that there be no change to the existing gratuity contribution structure,” CITA said.
Chamber sought lower rate
The Compass reached out to the Chamber of Commerce for comment on the proposed changes to the minimum wage and is awaiting a response.
However, the chamber articulated its recommendation in its submission which was included in the minimum wage committee’s report.
It said its members, which consist of 400 small Caymanian-owned businesses, agreed that an increase in the minimum wage “is overdue” and recommended a rate increase from $6 to between $7.50 and $8.
“They [chamber members] stated that increasing the rate beyond KY$8.00 will adversely impact them and may lead to staff and work hour reductions and price increases, causing a rise in the cost of goods and services in an economy that already is contending with a high cost of doing business and living,” the chamber’s minority report stated.
It said members support a rate increase of between $7.50 and $8, to be implemented from July 2024, since this is the rate that they believe will least impact their businesses and will allow them to sustain their staffing and pricing levels.
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July 2024? Companies will need more than 2 months to work through this. There are to many company’s that pay miminum wage and have to adjust accordingly with hourly charge example construction security restaurants. The chamber members can’t make that decision for other companies. We got 6 months to inform clients of the increase 2 months isn’t enough.