Virgin Atlantic and the Unite Union which represents cabin crew have had to go back to the drawing board in negotiating a new pay deal after the original proposal was furiously rejected by many union members. It’s believed that the proposed deal would have seen average annual allowances of around £7,500 paid to cabin crew cut in half. The union says Virgin had to revisit how it pays cabin crew because it consistently failed HMRC audits on tax-free allowances.
Virgin Atlantic had previously been allowed to set its own allowances which are meant to cover incidentals like food and drink when a member of cabin crew is staying away from home on a layover. These allowances are tax-free but are subject to scrutiny from the tax authorities to prove they are actually being spent as they should and not bulking out the tax paid element of a crew members wages.
The airline wasn’t able to prove the allowances were being spent as intended and as a result, HMRC wanted to impose its own set amounts known as ‘Worldwide’ rates – these were significantly below what Virgin Atlantic cabin crew were previously being paid.
That drop in allowances would have been offset by a proposed increase in basic salary of around 3.7% – a figure that the union described as industry-leading but would in effect still have meant a drop in wages in real terms. In fact, solicitors were even brought in to investigate whether the new pay deal (with lower wages) would actually push cabin crew salaries below the minimum wage.
One British newspaper suggested cabin crew were so angry with the offer that they were planning on going on strike – although it looks like both sides have now gone back to the drawing board in an attempt to avoid a nasty industrial dispute.
“We have approached the company and they have agreed to remove the HMRC subsistence allowances restructure from their pay offer,” the union has told its members in a new communication.
A best and final offer is expected to be sent out within the next few weeks. Any new pay deal will have to be implemented by 1st June – the deadline set by HMRC for the current allowance system to be wound up.
“We would like to categorically state that this pay offer has not been agreed in advance but negotiated following a very clear directive from the membership,” the email continues.
A Virgin Atlantic spokesperson has previously told us that the pay negotiations had nothing to do with the company failing an HMRC audit and were part of a routine pay review process.