Leaders of the Cayman Island hospitality industry are protesting proposals that would phase out their option to supplement low employee wages with gratuities to meet the minimum wage standard, the Cayman Compass has reported.

Cayman’s Minimum Wage Advisory Committee report proposes a new minimum wage of $8.75-an-hour (CI$1= US$1.20) and a phasing-out of the loophole that allows hospitality businesses to use gratuities for up to 25 per cent of their employees’ wages.

But leaders in the hospitality industry say the changes will further burden struggling businesses.

The Cayman Compass article said: “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 per cent annually for the next five years.”

The Minimum Wage Advisory Committee report reveals that the Cayman Chamber of Commerce sought an even lower minimum wage rate, only proposing to increase it from $6 to between $7.50 and $8.

Anything above $8, the chamber’s minority report stated, “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”.

Even the Cayman Islands Tourism Association, which played an active role in the committee, responded with concern.

The association said it was “disappointed in the recommendation to phase out the gratuity contribution to minimum wage for Approved Gratuity Schemes over the next five years”.

The CITA agreed with the minimum wage increase “to create more equitable and practical compensation to low income workers”.

But the CITA’s minority report registered its concerns with “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”.

Further, it said: “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.”

The 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.

“Given the severity of the implications to this industry, it is critically important that there be no change to the existing gratuity contribution structure,” the CITA said.