First it was liquor. Then gaming tokes, and next lap dances. Each at one point came under governmental scrutiny and eventually regulation. This morning, the news on KNPR was of FAA whistle-blowers prompting an industry-wide look into airplane maintenance records, requiring airlines to comply or be grounded. Play ball or you’re out of the game? I think Vegas can identify. So can we really feign shock that the government has come for another pass through our buffet of vice, this time for a piece of the nightlife pie?
While our casinos grew bigger and more bad-ass over the last 10 years, club owners and operators weren’t exactly just standing around with their check-signing hands in their pockets. They followed suit, and in some cases even led the charge, transforming the casino-owned nightclub from a pleasant hotel/gaming amenity to a bona fide attraction, a moneymaking mega-machine able to transform the raw materials of tourist money, cheap liquor and mainstream music into a whole new scene, and a profitable one. But as the scene grew, so too did the money that has never seen the light of day or an accountant’s cubicle.
Every industry veteran I’ve spoken with since Wednesday, February 20, when IRS agents fell upon Pure Management Group’s offices and venues, has in one way or another echoed the sentiment: “I saw this coming.” Whether that literally means that he or she had heard stories about internal audits and impending doom or had just seen the volume of unaccounted-for cash and abject greed increasing exponentially throughout the industry over a short period of time, the fact remains that while gaming and other cash-centric industries came under strict regulation, nightclubs continued to operate, as PMG reps say, “business as usual.” For many clubs, that means that certain staffers rely upon the rarely discussed “point system” for the bulk of their pay—cash which it’s up to the hosts, most of whom are independent contractors, to claim as income.
Borrowed from an old French method of pooling and divvying restaurant tips by seniority, the point system also resembles the time-tested manner by which many hotel valets assign tips by hours worked—the math is not percentage-based, and that makes it a cinch for nightclub staff to divide the pot at the end of the night quickly and efficiently.
Here’s how: Clubs operating on the point system vary their methods as widely as a child’s upbringing varies from couple to couple. But the basics depend upon the assignment of the pool members (usually VIP and door hosts, but sometimes also security, management and the house, meaning club owners; bar and cocktails may have their own or be included, too). Each member is assigned a point value based on seniority of position (two insiders rattled off 10, 8, 4, 2 and 1 from management down to porter; another added 17 and 15). At the end of the night, all tips are turned over to an assigned person and the divvying begins.
This is where things get dicey. That person may be a manager, a host or any number of other figures, including the owner him- or herself. At some clubs the house immediately takes a cut—I’ve heard up to 50 percent. At others, the house takes absolutely nothing. A tally is made of the total number of points held by the staff working that night. This is divided into the tip total to get the value of one point. If you are a one-point staffer, then that’s what you get. A two-point staffer gets double, and so on up the ladder.
One host friend of mine admitted she doesn’t know her point value, “but I’m told I’m near the top.” Hmmm ... I know what I make. Why doesn’t she? Until recently, she received her cut of the tip pool days after the weekend was done, and just had to assume the cash in her envelope was correct. Since February 20, she’s been receiving her tips via her paycheck, and bitterly, at that.
Another host I spoke to, at PMG, reported that at least 20 staff members received letters that the IRS would be investigating the last four years of their tax claims; he estimated 10-12 senior hosts are among the group. He added that he’ll no longer be an independent contractor; rather he’ll be converted to an employee with full benefits, the works. To hear him tell it, you’d think he was being asked to work in a cocktail dress.
Benefits and regular paychecks mean a major dampening of spirits at the doors of clubs trying to proactively bring their cash business in line, which could instigate a migration out of the nightlife biz. Said one lifelong club veteran, “It’s money the IRS wants a part of … Everyone’s gonna follow procedure. The little guys are scared. The big guys are scared. It’s opened everyone’s eyes.”
Xania Woodman thinks globally and parties locally. And frequently. E-mail her at [email protected] and visit thecircuitlv.com to sign up for Xania’s free weekly newsletter.