Ley de mozos ( law of the waiters )

[fanning]

This week passed a law of law the waiters, which implies that all restaurants, bars, discos, hotels etc. have to charge 10% extra, and pay this to the employees.
At first this sounds very nice for the employees, they get extra money !
But reality is a lot different, the law is passed without calculating numbers.
At the moment a law is valid which allows the services industry to charge 0% - 13% services. This amount has to be paid to the employee.
But for example the fast food chains are misusing this law in paying the salaries with this money. Why they do this ? They use it as a 'trick' to pay less IGV ( sales tax), as the services payment is not included in the IGV amount. But this is illegal ! But most businesses who charge the services apply it in this way. ( This is a bit technical, but is the reason why fastfoods apply 'services 'in the bills )

OK, so far so good, the government wants to regularize this. But what are the implications if they charge 10% services, and actually pay this to their employees.

At the moment a worker in for example Bembos gets maybe the minimum salary ( S/. 600 ). ( which is paid of the 13% services which are included in your bill )
If the law gets into effect, they have to pay the minimum salary PLUS 10% of the sales.
Sounds great no ? But how much is this 10% ?
Lets assume a Bembos, they sell each day S/. 20,000 ( estimate ), so S/. 2,000 goes to the employees.
Times 30 days, is S/. 60,000 to split up between the personnel, lets say 20 employees.
This means that each employee gets S/. 3000 services + S/. 600 base salary = S/. 3600
This is the new law, and clearly it would be impossible in Peru to pay S/. 3600 to a hamburger cook in Bembos ! What will be the result ? Many companies who are struggling to work formal are forced to work informal, or simply stop operating.

In all the information of the 'Gremios' they only talk of some stupid details that 0.5% goes to some Aprista syndicate, but the real problem is that it is just impossible to increase salaries from S/. 600 to S/. 3600 overnight by some government decree.

It would mean for our hotel for example that we would work without profit !?! ( and we are paying more than the minimum wage .. )

[chuck]

Yeah and if a business was to add 10% to my bill there is no way I am paying propina! So the employee loses out again - not good. I actually dont mind paying a propina if i get good service and a smile.

[GianO]

Do all restruants have to comply with this new law?

For example if i went to La Caravana or a "mom and pop" resturant and ordered whatever, this 10% tax would show up on the bill?

[fanning]

It has been approved by the congress. It only needs a formal approvement by the president, and then a 'reglamento' of Ministerio de Trabajo. Then ALL restaurants, bars, hotels, discos etc. are obliged to charge you 10% extra and distribute that amount over the workers ( which results in doubling up to six times their salary )

This simply will result in a lot of companies who work formal to go bankrupt, and increase informal companies.
I did a bit of research, for example Swiss hotel, a 5 star hotel, actually pays now the services to their employees, resulting that a cleaner makes around S/. 1800, a very good pay for a worker. But that is in a FIVE star hotel. Not every small hotel or bar can afford that type of wages for cleaners. When the new law comes into effect, they will have to pay that type of salaries to their workers, resulting that the go out of business or go informal.

I can understand that a government wants to increase wages, by 5% - 30%, but how can they be so naive to think that overnight they can increase salaries with 200% - 600% without affecting business.
And this comes from Alan Garcia and the Apra, the new government will only be more business unfriendly ( or at least not take away benefits of workers established by a former president.. )

[sbaustin]

It has been approved by the congress. It only needs a formal approvement by the president, and then a 'reglamento' of Ministerio de Trabajo. Then ALL restaurants, bars, hotels, discos etc. are obliged to charge you 10% extra and distribute that amount over the workers ( which results in doubling up to six times their salary )

This simply will result in a lot of companies who work formal to go bankrupt, and increase informal companies.
I did a bit of research, for example Swiss hotel, a 5 star hotel, actually pays now the services to their employees, resulting that a cleaner makes around S/. 1800, a very good pay for a worker. But that is in a FIVE star hotel. Not every small hotel or bar can afford that type of wages for cleaners. When the new law comes into effect, they will have to pay that type of salaries to their workers, resulting that the go out of business or go informal.

I can understand that a government wants to increase wages, by 5% - 30%, but how can they be so naive to think that overnight they can increase salaries with 200% - 600% without affecting business.
And this comes from Alan Garcia and the Apra, the new government will only be more business unfriendly ( or at least not take away benefits of workers established by a former president.. )

I agree with you but you are assuming that prices are fixed which they are not. You have to assume businesses will pass along the costs to clients (ie room and food prices go up). If the higher prices result in considerably less business (which depends) then you're in trouble.

[rama0929]

Hilarious, as soon as a law is implemented, people try and figure away around it. Seems no one took the law of unintended consequences into consideration.

[fanning]

I agree with you but you are assuming that prices are fixed which they are not. You have to assume businesses will pass along the costs to clients (ie room and food prices go up). If the higher prices result in considerably less business (which depends) then you're in trouble.

Many businesses are run with a 5-10% profitmargin, now they will be forced to work with 15%-20% profitmargins, which your informal neighbour business is not charging.
You would die as a business. And apart from that, it is not realistic to increase wages by a factor of 2 up to 6. ( in the case of fastfood restaurants, with a lot of turnover, and low margins ).
My problem is that it is not a university debate, but a reality which is now fixed in a law !

[sbaustin]

I agree with you but you are assuming that prices are fixed which they are not. You have to assume businesses will pass along the costs to clients (ie room and food prices go up). If the higher prices result in considerably less business (which depends) then you're in trouble.

Many businesses are run with a 5-10% profitmargin, now they will be forced to work with 15%-20% profitmargins, which your informal neighbour business is not charging.
You would die as a business. And apart from that, it is not realistic to increase wages by a factor of 2 up to 6. ( in the case of fastfood restaurants, with a lot of turnover, and low margins ).
My problem is that it is not a university debate, but a reality which is now fixed in a law !

Are you disagreeing with me that businesses won't raise their prices to offset costs? For the record, I'm very much a free market person, I'm just pointing out that prices are not fixed and I'm not talking about academic studies. I'm a business owner as well and have gone through this kind of stuff too. When costs raise substantially, prices do to.

Also, the government probably doesn't care(or cares less) about informal businesses especially since the government probably views them as somewhat criminal. I'm not saying it is, but when the government is concerned and sees people not paying taxes, they probably don't care that these informal businesses employ lots of people.

[americorps]

I am an avid tipper.

I have, however, already been informing restaurants that if they try to force me to tip when I have bad service, I will not pay it.

I have also written the chains that I often eat at that I will either quit or greatly reduce my visits if they force me to tip.

I encourage them to to lobby congress to change the rule.

One funny thing about laws in Peru...they seem to be written, but not implemented and it seems by the time they are implemented, only the non controversial parts get published. Hopefully that will be the case here.

[MarcoPE]

Yes, I definitely won't be tipping if charged an extra 10% ...I already get mad at the cubierto charge that is sometimes added in...my wife says that is for the forks and knives....and I always say I should be able to take them with me then But seriously, at least the new law seems like a good motivator for eating at home way more often. Well, gotta run...I am going to apply for a job down at Bembos!!

[Kelly]

Is this 10% going to be on top of the 13% that you mentioned the fast food places are already charging? Or instead of?

[Pollo mani]

My partner works at the swissotel , and yes ALL employees at the 4-5 star hotels already get paid this extra , it is chrage to the guest and then paid out to the employees every month. I don't see where you say this will drive you to be informal or go out all together as it is just an added service fee you charge to your customer then you pass it along to your employees. It is not something you are paying out of pocket. Most All places charge this now they all have differant names for it on the bill. Friend working at The Miraflores Park Hotel is telling us that the hotel there has capped the amount they will pay out to employees,above that amount the hotel keeps, They are some of the biggest crooks in Miraflores. I hope one day they get caught but the office of trabajo and forced to pay huge fines for the mistreatment of employees there.

[americorps]

pollomani,

comparing some upper end and 4-5 star properties does not really apply to the business model of the low to mid range restaurants in Lima.

Those businesses will suffer in a very different way.

[fanning]

Friend working at The Miraflores Park Hotel is telling us that the hotel there has capped the amount they will pay out to employees,above that amount the hotel keeps, They are some of the biggest crooks in Miraflores.

So here you give EXACTLY the reason why a law like this cannot work in Peru !
So even now, in the current situation that it isn't obligatorily, and up to the business to charge the surcharge yes or no, the PARK HOTEL, one of the most expensive hotels in Peru, doesn't pay this amount IN FULL ( as required by law ) to it's employees.
They cap this amount, and keep part for the business, so just imagine what would happen if ANY business in the restaurant / bar / hotel has to charge this AND distribute it to all workers. It will not happen, and create informality to almost all businesses.

We, as a business, are now finally in a situation that we (almost) obey all vigent laws, and specifically the working-laws, but this law would make business live impossible. I could stay formal, and loose our customers to other 2-3 star hotels who break the law, or also break the law .. What a choice ..

[rama0929]

I hope one day they get caught but the office of trabajo and forced to pay huge fines for the mistreatment of employees there.

I guess there are no whistleblower laws in Peru?

[rama0929]

We, as a business, are now finally in a situation that we (almost) obey all vigent laws, and specifically the working-laws, but this law would make business live impossible. I could stay formal, and loose our customers to other 2-3 star hotels who break the law, or also break the law .. What a choice ..

Almost, obey? Clarification, please?

[fanning]

Almost in the sense like for example for the safety checks of Defensa Civil you are not allowed to have any obstructions in your hallways, and as soon as they leave, you put the plants and pots back in place ..

[rama0929]

Almost in the sense like for example for the safety checks of Defensa Civil you are not allowed to have any obstructions in your hallways, and as soon as they leave, you put the plants and pots back in place ..

Ooooo, I'm TELLING!

[Polaron]

I would be interested in hearing the viewpoints of the people who proposed this law. Has it actually passed the full Congress, or is it still being debated?

[fanning]

Hereby a link with the law as proposed.
On page 9 you find a 'calculation' in which it is presented like each employee would receive approx S/. 42 a month extra. ( in reality if the law is applied as it is written this amount will be between S/. 600 - S/. 3600 )
And yes it passed congress, only the signature of Alan Garcia is missing. Our only hope is that it is a law proposed by Jorge del Castillo, not his biggest friend right now..

[MarcoPE]

We went to Manolos yesterday in Miraflores and my wife noticed a 10% service charge on the bill. I assumed this is the law in effect (early possibly) or is this a different charge?

[rama0929]

We went to Manolos yesterday in Miraflores and my wife noticed a 10% service charge on the bill. I assumed this is the law in effect (early possibly) or is this a different charge?

It may be a different charge. Having said that, I do remember going to TGIFridays last October and one of my friends expressing surprise at a tax that was on my bill. That may be the same one. I didn't know if it's something limited to Miraflores, because I don't remember seeing the same charge applied @ Mega Plaza.

[Polaron]

Maybe it was the Overtly Gringo Tax that was added to the bill. Or maybe it was just the VAT tax.

[americorps]

some higher end restaurants, especially in hotels are now adding service fees, cubierto fees and including tip without making it clear.

I always inspect my bill and demand to speak to the manager and have him or her remove them from my bill as I will not pay a fee not told to me up-front.

[rama0929]

Maybe it was the Overtly Gringo Tax that was added to the bill. Or maybe it was just the VAT tax.

Could've been; my friend was the one who called it to my attention, she was trying to figure out what it was


I chalked it up to the price of doing business in Peru

[tomsax]

I agree with you fanning. It's total madness. Many businesses will put up prices but many won't be able to as they have too much competition from informal businesses or businesses that will find ways of not obeying this law. So it will be a further incentive to go informal or look for ways to not pay this particular tax, leading to greater general informality and perhaps lower taxes overall. Nice one!