Conran staff basic pay is less than £2 per hour

One of Britain's most exclusive restaurant groups pays some of its waiting staff a basic wage of less than £2 per hour, The Independent has discovered.

D&D London, which posted revenues of £71m this year and is half owned by Sir Terence Conran, joins a growing list of establishments using service charges to top up pay to the national minimum wage.

A former waiter at the Paternoster Chop House, one of D&D's 20 London restaurants, has shown The Independent a contract from earlier this summer stating that he received "house pay" of £1.88 per hour, or little over a third of the £5.52 minimum for workers aged 22 and over.

A separate document outlining the restaurant's "tronc" system for distributing tips reveals that a share of the restaurant's 12.5 per cent discretionary service charges would boost pay by an amount "in the region of £6.29 per hour". In a statement, D&D, which also owns Quaglino's and Skylon in the capital, and restaurants in Paris and New York, confirmed it does not have a policy "specifying minimum house pay". The manager of the Paternoster Chop House was unavailable for comment.

After a recent trial shift the waiter says he was told he would receive "between £15,000 and £17,000 a year". During a second week of work at the Chop House, near St Paul's Cathedral, a contract was drawn up.

"I read it and couldn't believe my eyes," the waiter said. "It must be legal but I told them it was immoral to pay people £1.88 an hour. Customers don't realise the 12.5 per cent added to the bill as a service charge is to make up the minimum wage, not to reward the waiter for good service."

A loophole in minimum wage legislation means the practice of "topping up", also operated by some of the nation's biggest chains, including Café Rouge, Strada and Caffè Uno, is legal. The Independent is calling on the Government to close the loophole so waiting staff are guaranteed at least the minimum wage with service charges and tips on top.

Conran's 51 per cent stake in D&D, which he founded as Conran Restaurants in 1991, is worth an estimated £100m. The firm, which employs around 1,500 staff, is headed by chairman and chief executive, Des Gunewardena.

In an email, Mr Gunewardena defended the Paternoster Chop House wage structure: "Our house pay and allocation of service charge are set by each general manager and Troncmaster [in each restaurant] ... The likelihood of service charge falling to levels such that minimum wage earnings are not achieved is very low. If this were to happen then of course pay rates would be adjusted."

He added: "We have reviewed our policy many times and will do so again if we think a change could be for the better. But our conclusion has been that our current policy is best and fully compliant and in sympathy with the objectives of minimum wage legislation."

Last week, former minister Ian McCartney revealed the Government had bowed to industry pressure to use service charges to boost wages. "It was never intended that the Minimum Wage Act should be used in this way," he said.

The former waiter at the Paternoster Chop House did not sign his contract and was unemployed for a time. "I took a moral standpoint and said it's wrong and walked out, but a lot of people can't do that," he said. "I've worked in restaurants in villages where young waiters are paid £7 an hour plus all tips."

* Ping Pong, a London chain of dim sum restaurants, confirmed, after a tip-off to The Independent, that it uses service charges to top up to or above the minimum wage. Ping Pong said in a statement: "The current legislation allows us to include credit card tips as part of the minimum wage ... Should anyone fall below minimum wage levels we always top it up".

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