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Vol.
3 :: No. 3 February, 2001 (Magh-Falgun) |
Cover Feature
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Cover Feature |
The long- awaited report from the Ligal Committee is presented to the government, but the dispute between the hotel employees and their employers over the issue of 10% service charge is continuing even beyond February 11, the date till which the hotel employees’ unions had postponed their agitation. And as the indications stand now, this war of attrition is likely to last considerably longer than expected till recently.
| Far from being an ordinary industrial dispute, the row over the 10% service charge in hotels has been proving to be of wide-ranging ramification. As the hotel employees’ unions started pressing for their, what they call, ‘two decades long demand’, of converting the system of voluntary tipping into a compulsory service charge of 10% of the hotel bills, the tourist arrival by air during the year 2000 was 10.61% below the level of the previous year . That was largely due to this service charge row, according to Nepal Tourism Board (NTB). Though not all may be ready to accept that argument, it provided a very good point for those hoteliers who are dead against the proposal to impose the service charge. |
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Sensing it to be just a beginning of a new round of labour agitation for further hike in their wages, perks and benefits, entire community of the employers is getting united with the hoteliers to check the movement from spreading any further. Hoteliers have argued that the movement may now spread in other service businesses such as nursing homes, airlines etc. where the attendants would start demanding for similar service charges. Leaders of warring parties: Bishnu Lamsal (left), member secretary of Joint-Action Committee of hotel workers and Narendra Bajracharya (right), president of HAN |
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The date of February 11 was fixed, say the unions, as requested by the Deputy Prime Minister who had issued a statement asking the unions to postpone their agitation for two months and wait for a government decision. Before that call the government had set up a high level committee headed by Vice-Chairman of National Planning Commission (NPC) Prithvi Raj Ligal to look into the demand of the agitating employees. Though the committee had already prepared its report early January it was not submitted before the government because some members could not agree to the recommendation that the issue be sent back to the hoteliers and employees for themselves to decide. The revised report was however submitted to the Prime Minister within the deadline, though the government is yet to take its decision (see box for what the Committee has concluded in its report).
But the outcome was a foregone conclusion. The committee was boycotted by the hotel employees, because, as they have complained, it was dominated by employers and people biased against the employees. That means, whatever the government decided was going to be based on the Ligal committee recommendations, but as the committee itself was not accepted by the employees, the decision was not to be accepted by the unions. Therefore, the logical prediction was - a hotel strike from February 12. But the unions extended their deadline to February 17, thus keeping the Democle's sword dangling over the head of the hoteliers.
Unions said that they were waiting till February 11 simply to honour the DPM’s request. "The DPM has not asked us to withdraw our agitation, he has only asked us to ‘postpone’ it". That was the argument that they had put forward. "If this is so, it is a very dangerous signal", said the hoteliers showing their frustration that a high level government authority would side with agitated workers to schedule an antisocial activity as a strike.
On February 6, the unions had presented a renewed warning to DPM that if their demand is not fulfilled by February 12, they will go again on strike beginning February 13.
Interestingly, the dispute was characterized by the two disputing parties negotiating with the government at two different levels. While the unions were talking to the DPM, the hoteliers preferred to meet the Prime Minister himself.
The problem seemed to be unlikely to be resolved also because the unions put it on a belligerent note while raising the issue initially. Look at the arguments that the unions have put forward. One of them says, the service charge system will force the hotels to maintain transparent accounts. Accepting to introduce service charge system, the hotels will be accepting, in one way, that they are not maintaining proper accounts. "Finance Ministry ... has already used this point to justify the introduction of VAT. ...Where VAT is already levied there is no chance of the books of accounts being opaque", argued Hotel Association Nepal (HAN) in its 16 point "rebuttal" to an 11 page presentation made by the employees’ unions to the Ligal Committee.
More belligerence from workers’ part was shown when they reportedly threatened to convert the hotels into Mashan (cremention grounds).
That the hoteliers too are equally belligerent was evidenced sufficiently when they actually padlocked the main gates of their hotels on December 11 (though only for a day and night), and asked their guests to make alternate arrangements. And they still are belligerent. If the unions do not lift this Democle's sword of strike threat off the heads of the hoteliers, "we’ll not close the hotels for only one day, but for the coming seven months", said one hotelier to Business Age. He seems to mean it when viewed against the fact that February to
1990, May 28 Agreement in the then Hotel Soaltee Oberoi to introduce service charge from October 1, 1991 subject to no objection from HMG
1997 HMG sets up a high level task force to study the pros and cons of service charge in hotels. The task force had no mandate to recommend imposition of service charge. The Visit Nepal Year 1998 puts the issue under its shadow.
2000
February 15 GEFONT-affiliated union of the hotel workers announces series of pressure programs to push for the service charge demand.
August 23 Unions of hotel workers affiliated to NTUC and GEFONT form an alliance to push for this demand of service charge.
September 13 One point demand asking for 10% service charge presented to all the hotels giving an ultimatum that if the demand is not met the workers would go on strike from November 19, 2000.
November 11 Unions postpone the scheduled strike by one month after negotiation with HMG. But hoteliers boycott the negotiations.
November 12 HMG forms a 13-member committee headed by NPC Vice Chairman to look into the matter of service charge in hotels and submit a report within three months. Unions object to it saying that they can wait for only one month.
December 8 Hotel employees start wearing black band around their arms while at work showing their demand for 10% Service Charge.
December 10 DPM Ram Chandra Paudel issues a statement asking the unions ‘to postpone their agitation for two months’. Unions oblige, but hoteliers object to the wordings of DPM’s statement.
December 11 Hoteliers close down the hotels for a day and night.
December 12 Hotels reopen after hoteliess negotiate with the Prime Minister, but tensions linger as nothing is decided.
2001
February 6 Unions present a complaint letter to DPM for the delay in taking decision, and threaten to go on strike from February 13 if their demand is not met.
February 9 Ligal committee submits its report to PM’s office, but the PM was out of the capital.
February 12 Unions extend the deadline to February 17.
February 13 Ligal committee apprises the PM about its report.
August is normally a slack period for tourism in Nepal. Closing down the operations, the hotels will not be losing very much during this period.
But the unions seem to be in no mood to remove the sword. They seem to have adopted a strategy of irritating the hoteliess till the demand is met. If hoteliers decide to close down, workers will decide to go to work to repeat the threat again on a later date.
Unions have been waving a sheaf of agreements that the unit level unions have had with their employers on various dates. One of such agreements is as old as 1990 with Hotel Soaltee (a five star property) and the latest one is with Fishtail Lodge of Pokhara (September 13, 2000). All these agreements read something like this: "The hotel agrees to introduce the service charge if the government or HAN decides to implement it". That was the reason why the issue was referred to the government. But observers point out that that it is a matter which should have been decided at the enterprise level itself, or at best, at the industry level. HAN and the employees unions could have negotiated it between themselves.
They could have, but did not like to. The reason perhaps lies in the difference of opinion within HAN. In private, the 4 or 5 star hoteliers say that they do not have any objection to introduce the service charge. In fact, they have already agreed to it. But they cannot go against the will of their fellows. That is why they referred it to the higher authorities.
But the issue has given the hoteliers an opportunity to press with the government for a total review of entire matters related to industrial relations and the tourism industry. For example, they want the terms 'tourism' and ‘tourist’ to be properly defined. Nepali nationals are not allowed to travel on tourist buses. But the same Nepalis are to be billed for the 2% Tourist Service Charge collected for Nepal Tourism Board. Why this double standard? Though the Ligal committee was asked to review also about these related issues, it says that it could not do that within, what it calls, the limited time.
They also want hotel industry to be brought under the purview of Essential Services Act and that such a mechanism should be included in the Act so as to address violation of the Act automatically and immediately. They also want provisions of the existing labour law so amended that employers have the authority of hiring and firing employees. The present Labour Act is too much biased in favour of the labour, they say, and call it "the Labourers’ Act".
That took the issue to a different level, attracting employers from all the sectors to actively side with the hoteliers. Federation of Nepalese Chamber of Commerce and Industry (FNCCI) had to step in immediately. Industrial Relation Committee (IRC), an alliance of 16 associations, mostly of those related directly with tourism industry, was formed under the aegis of FNCCI, to show employers’ solidarity with HAN. FNCCI was perhaps apprehensive that if it did not take the lead, HAN would go under the fold of other trade associations, such as Nepal Chamber of Commerce, which is, despite being a constituent member of FNCCI, is trying to emerge as an independent national level chamber. Though individual hotels are members of FNCCI, HAN is not. With FNCCI’s cooperation in this episode, Perhaps HAN will now become a member of FNCCI.
That means the trade unions now face far more strongly united employers than
they were in September 2000, when the latest presentation of the service charge
demand was made. 
But the employees too are better united now than in the past as a result of the alliance formed for the service charge issue between the constituent unions of NTUC and GEFONT, the two most powerful national level trade unions affiliated to the ruling Nepali Congress and main opposition party (CPN-UML) respectively. Being the first issue for which they are fighting jointly, it is not going to be easy for either of them to leave the field. If they do, that will be on the risk of not only being declared traitor of the workers’ cause. The membership base of the deserter may dwindle fast. The challenge therefore was in finding a face-saving solution. Some hoteliers say, as they are already agreed to introduce service charge, the solution may be in fixing a future date from which the charge will be applicable in all hotels and restaurants.
But the Ligal Committee came up with a middle path recommendation. It has recommended that the tips be now institutionalized. That means, the tips will remain voluntary, but whatever is received as tips from the guests will be collected in a fund to be distributed later among the hotel employees and to be used for improvement in the skills of the employees and also to compensate for the breakage etc. of hotel property.
That addresses some of problems cited by the unions about present tipping system. But the employees’ insistence that the new system be called a service charge and that it be fixed at 10% of the bill are rejected by the committee, making it easier for the hotels to accept it since it is not service charge. The committee has suggested that it should be called "hospitality charge".
It seems, the committee has found plausible the hoteliers’ argument that as there is no mechanism in the country to monitor service quality, it is impractical to levy service charge which presupposes a certain standard in the service provided.
The present problem is also seen as a part of the overall problem that the tourism sector is experiencing. The government on its part is providing enough points to conclude that it is not at all serious about this sector. Its reluctance to fill up the over six-month long vacancies in NTB is the example. Though the committee set up by the government to recommend the eight names from the private sector for NTB has already completed its job, the government is yet to select five names from that list. HMG’s style of handling the situation immediately after the hijacking of the Indian Airlines aircraft on the last week of 1999 had caused sufficient damage to the industry, and NTB has accepted that the hijack was another important factor responsible for the downfall in the tourism arrival during 2000. Referring to the problem of the service charge dispute to the government, both the hoteliers and hotel employees seemed to have passed the ball on to the wrong court.
Now that the Ligal Committee report
Trade Unions
l Will have positive effects on employment, tourism & other sectors of economy.
l Will reduce employee turnover in hotels
l Tipping is derogatory to the recipient and favours only the front line staff.
l Many countries already have service charge system.
l ILO has adopted a convention (No. 172) on service charge.
l Tourists are habituated to pay service charge.
l Lower level staff in hotels are paid very low. Service charge will compensate them.
l Even with service charge Nepal will remain a cheap destination.
l Nepali hotels have already accepted to introduce service charge. It only needs govt. decision.
l The movement is not politically motivated.
l Service charge will be implemented in hotels and restaurants frequented by tourists not in tea shops, fast-food joints or Dal-Bhat restaurants frequented by ordinary Nepalis.
l Service charge is a' right' of the workers to get it as an 'incentive'.
Hoteliers
l Will have negative effects on employment, tourism & other sectors of economy.
l Is against the principle of pricing.
l Is against the image of a nation with friendly people.
l Will lead to Nepal out–pricing other destinations.
l Investment in hotels will stagnate.
l As regulatory framework to ensure service quality is lacking, the issue of service charge is still premature.
l The present tipping system is alright.
l As the trade unions have termed it an "Andolan" or a revolutionary movement , it is illegal.
l The movement is politically motivated and instigated by the union leaders at the centre. Unit level employees are happy with the salary and perks they are getting.
l If service charge is not to be implemented in hotels or restaurants frequented by Nepalis, it should not be applicable in any of them that attracts even a single Nepali.
l If service charge is an 'incentive', it cannot be a 'right'.
l If the workers demand a fixed percentage of the turnover for themselves as service charge and the government does the same as taxes, the other stakeholder (the investor) also should be guaranteed a fixed profit on the turnover.
l Service charge may be acceptable if agreed to be introduced on some later date.
Ligal Committee Report
Ligal committee was entrusted with the task of studying all aspect of service charge dispute and submitting concrete recommendations about it. The committee tried to study the other aspects, i.e. those related with the labour laws, but concluded that it was not possible within the stipulated time to go for these other aspects. Therefore, it concentrated only on service charge issue.
After analysing the ILO documents and information collected from countries where service charge is practised, the ligal committee found and concluded that:
(1) Tips are uncertain , so a practice of fixed wage system should be encouraged. Service charge system is a transitional phase from tipping system toward fixed wage system.
(2) If tips are the inseparable part of worker’s wages, the management should adjust tips into fixed wage.
(3) If tips are voluntary payments, they will remain in practice even after the introduction of service charge.
(4) Where service charge is levied, tipping is discouraged or even banned by law.
(5) Service charge is differently practised in different countries. It is compulsory only in Canada. It goes into government offers in Belgium and to the municipality in Belarus. In some countries the customer is not compelled to pay it if not satisfied with the service.
(6) In Nepal, hotel workers who get tips are found to be paid low salary in general. There is wide gap between the salaries of the highest paid and lowest paid employees in the hotels.
(7) Nepal has lately become an expensive destination in comparison to the competitor destinations.
(8) Hotels in Nepal have been forced to sell their rooms much cheaper than their tariff rates. Still their occupancy is very low.
(9) Present labour law is not so suitable for service industry and thus needs to be reviewed.
(10) For various reasons outside the control of the industry, hotel industry is in an adverse situation. So it is not appropriate time for a new experiment with service charge.
(11) But the existing system of tipping cannot be left as it is. It should be institutionalized as a transition to a compulsory service charge system and finally to a fixed wage system.
(12) If the service charge is introduced with government interference and involvement, it will spread to other sub-sectors within tourism and then to other sectors of the economy as well.
(13) Service charge issue is best resolved at enterprise level as a business strategy. Only national level policy issues should come for tripartite discussion.
(14) Voluntary service charge should be introduced now and it should be called "hospitality charge" so that it is not confused with "tourism service charge" that is presently being levied in hotels.
(15) Of the total hospitality charge collected 20% should be used to compensate for breakage, 30% for development of service standards from employees and 50% for workers' welfare and for distribution among them.
(16) In pre-sold services (i.e. for which the hotels have already agreed a price with the buyers) a lead-time be allowed for necessary adjustments of service charge.
(17) Nepal Tourism Board should be designated the regulatory agency to introduce and monitor service standards in hotel and restaurants of the unorganized sector. Minimum standards of service be fixed and monitored in tourism hotels and restaurants.
Note : Interpretation made by Business Age of the gist from Ligal Committee report
has come out and its recommendations are reportedly acceptable to the hoteliers, the problem seems to have resolved, at least for the time being. But the trade unions are still to make their view clear. Only one day before the Prime Minister was handed over the Ligal committee report, one leader of the hotel employees was reported saying that the employees will not accept anything less than service charge and that it must be 10%.
Or it may also be equally true that, as some cynics point out, this war of attrition is just one part of a grander design to ruin the Nepali tourism industry. Failing to address the issue immediately between themselves, the hoteliers and unions have simply helped the grand designers.
If that is so, Nepali tourism industry should be prepared to face another attack by the start of next season, even if the current problem is solved to the satisfaction of both parties.
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