UK hoteliers enter 2018 anticipating new labor laws
UK hoteliers enter 2018 anticipating new labor laws
18 JANUARY 2018 8:27 AM

With the U.K. government enforcing new legislation on businesses, hoteliers will see more opportunities ahead if they keep on top of political and legal whims, changes and interpretations in regards to wages, salaries and licensing procedures.

LONDON—Hoteliers and other business leaders still are mostly behind the curve when it comes to recent or upcoming legislation in the United Kingdom, according to sources.

Speakers at the 25th annual Master Innholders Conference took turns sketching various worst-case scenarios and sensible operating plans for businesses when it comes to dealing with the National Minimum Wage, the General Data Protection Regulation and licensing laws.

The U.K. will adopt the European Union-devised General Data Protection Regulation in May. NMW is the minimum per-hour pay entitled to workers under age 25, while the National Living Wage—which entered U.K. law in April 2016—is the minimum per-hour pay entitled to workers 25 and older.

NMW has been the law for many years, and its pay structure for 2018 comes into law in April.

Jon Claypole, tax partner at accountancy* firm Mazars and a former senior inspector of taxes for Her Majesty’s Revenue and Customs, said he was worried about awareness within the hotel sector.

“The hospitality industry has its head in the sand about (NMW) and the risk to it from noncompliance,” Claypole said.

Claypole said he expects the hospitality industry will be targeted by HMRC.

“It has six dedicated teams looking into noncompliance,” Claypole said. “Compliance rests on the employer. Ignore this at your peril.”

Buyer beware
Claypole said hotels are particularly at risk to be noncompliant regarding salaried contracts or weekly wages, accommodations and uniforms.

Claypole said HMRC will interpret that the way non-salaried pay structures are set up will “inevitably mean staff will be underpaid,” and that “overpayments in some months cannot be offset against underpayments in others.”

Salary contracts effectively mean there is one pay period per year, he said. Unsalaried contracts do not, with “HMRC refusing to believe annual hours are ascertainable.”

HMRC will target investigations of “unmeasured hours,” Claypole added.

On the accommodations front, helping employees with lodging is another potential minefield, Claypole said. Deductions on rent and utilities on employer-provided accommodation reduces salary for NMW purposes.

“HMRC also argues deposits on accommodation reduces salaries, which I would say was debatable,” Claypole said, who added currently the allowable accommodation offset is £6.40 ($8.90) per day.

Claypole said exactly the same HRMC thinking applies to uniforms as it does to accommodation—that is, it reduces salaries.

Potential penalties
Claypole said HMRC levies two types of penalties on noncompliant businesses: heavy fines and “name and shame” penalties.

A typical fine is 200% of any underpayment, with a 50% reduction of paid within 14 days and capped at £20,000 ($27,820.82) per employee. The rise in zero-hours contracts—which are prevalent in the hospitality industry and place workers on call but guarantee them no work—have muddied the waters as to whether people are employees or not, but Claypole stressed the onus is on employers to be on the right side of legislation.

A “name and shame” penalty is generally £100 ($139) de minimis for each of the firm’s employees. Claypole said this penalty is not administered by HMRC but by another government entity, the Department for Business, Energy & Industrial Strategy.

Legal licensing
Thomas O’Maoileoin, partner at Thomas & Thomas Partners, a legal firm specializing in licensing law, said politicians and lawmakers in the U.K. are mostly in agreement that licensing legislation needs to change.

Current licensing rules are more than a decade old, and although amendments regularly are made, he said there is sentiment among Parliament that “the system is fundamentally flawed and needs an overhaul.”

O’Maoileoin added that the current government agenda, which notably includes Brexit, might mean some waiting before new legislation is announced. Once that is off the table, one area policymakers are keen to look at its abolition of local authority licensing committees, he said.

The committee also is looking into minimum pricing of alcoholic units, which O’Maoileoin said would not affect hotels, where prices already tend to be higher than at pubs and High Street restaurants.

Minimum unit pricing for alcoholic drinks is under consideration by the Supreme Court.

What would be advantageous to hoteliers, O’Maoileoin said, is that changes to the 2003 act also include combining licensing and planning committees.

“It is sensible to streamline these processes, as well as to do the same for the appeal process,” O’Maoileoin said. “All hurdles affect investment.”

O’Maoileoin said talk of local authorities adding a surcharge for those going through the planning process is not likely to be proposed for overnight accommodations.

“My view is that we will be left waiting on much of this,” O’Maoileoin said, who added it would be prudent for hoteliers to stay tuned on such legislative issues.

*Correction 8:55 a.m. EST 22 January 2018: A previous version of this article missrepresented the nature of the firm.

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