We’ve learnt that Virgin Atlantic is in urgent talks with its community of cabin crew after tax authorities in the United Kingdom started an investigation into the airline’s current setup for paying crew. Like many European airlines, Virgin Atlantic is believed to reduce its tax obligations and overall wage bill by paying cabin crew a low basic salary which is topped up with tax-free ad diem payments for food, drink and other basics whilst away from home.
But it looks like Virgin Atlantic has failed a recent audit of these tax-free payments which was conducted by the UK’s tax office, or as it’s officially known Her Majesty’s Revenue & Customs. What’s likely to have happened is that cabin crew weren’t able to prove the ad diem payments they had received were actually being used for sustenance on their layovers – a process that typically involves keeping receipts for even the smallest of purchases.
Virgin Atlantic’s method of paying cabin crew is understood to have long been a target for HMRC but the Crawley-based airline which is majority owned by Delta Air Lines has previously managed to avoid enforcement action by the taxman. Now, Virgin has been forced to evaluate how it pays cabin crew – who are understandably said to be up in arms over the situation.
New hire cabin crew would typically receive a low annual salary of just £15,600 ($20,600), as well as trip pay of £25 ($33) per sector. On top of that, a tax-free allowance paid in U.S. dollars would be loaded onto a individually issued debit card dubbed the ‘Little Red Card’. The allowance varied between destination and trip length but in general, longer trips or more expensive destinations would benefit from a larger allowance.
Virgin Atlantic is tabling several options for a future pay agreement that will hopefully see it staying on the right side of the taxman. The options will see Virgin increase the basic salary by a small amount – around 3.7% – but sector pay will be reduced to just £15 and allowances will be slashed. In some cases, by nearly half the current amount.
The Unite union has been in pay negotiations with Virgin Atlantic since last year and a recent survey of cabin crew at the airline highlighted sector pay and allowances as the two most pressing issues to be addressed.
Cabin crew will now be expected to vote on the airline’s proposals and bosses will be hoping to avoid a similar dispute to what’s happening at rival British Airways. Late last year, a faction of Virgin Atlantic pilots represented by the Professional Pilots Union voted in favour of strike action over Virgin’s refusal to recognise the union.
The PPU had planned a series of strikes in the run up to Christmas but was forced to cancel the planned industrial action after Virgin sent an 11-strong team of lawyers to the High Court to secure an injunction against the union.
In an emailed statement, a spokesperson for Virgin Atlantic claimed the change in pay and conditions was not the result of a HMRC investigation, telling us: “We can confirm we’re currently in the final stages of our cabin crew pay negotiations. These happen periodically and are not driven by HMRC”.