they returned to profit last year, according to the board formed to resolve the hotel contract dispute.

The decision to drop the controversial service charge was granted in the last round of contract talks.

But in its award issued last week, the Essential Industries Disputes Settlement Board said that while the money was needed to fund wage increases when the hotels were losing money, this was no longer the case.

"We are in unanimous opinion that the practice permitted for the period since the expiration of the last agreement should be eliminated, with return to the prior practice of gratuities being fully transferred to the employees for their benefit, the board said.

"That is particularly important where the base wages of tipped employees is particularly low because of those gratuities.'' The ruling, which was welcomed by Mr. Ottiwell Simmons, president of the Bermuda Industrial Union, which accepted the award on Thursday, also: Raised wages for all workrs by 3.2 percent in each of the first two years of the agreement and by 3.5 percent in the third year; Raised gratuities to $11.90 effective on the date the agreement is signed, $12.30 effective February 25, 1996, and $12.80 effective February 25, 1997; and Froze pension contributions in the first year of the new agreement and then increased each party's contribution by two cents per hour to 22 cents per employee and 37 cents from the employer in the secnd year and a further two cents each in the third year.

The HEB had proposed to increase the current gratuity annually to $11.70, $11.90 and $12.10 with $1 additional for groups and "retain the right to treat as a hotel income any additional amounts from mandatory gratuities/service charge and would introduce any negotiated increases after a two-week period''.

But the BIU had proposed that the hotels should be barred from retaining any collected gratuities.

On the issue of wages the BIU proposed percentage increases of 7.5, 6.5 and 5.5 respectively in years one, two, and three of the contract. These relate to all categories of employees. And in addition, the BIU proposed extra pay for certain workers, including waiters and bartenders who handle the cash register.

The HEB proposed one percent rises for live-in tipped and non-tipped employees in each of the three years on the contract, and two percent hikes for each year for live-out tipped and non-tipped workers.

The Board said: "The importance of the hotel industry to the economy of Bermuda and to the well-being of so many of its working citizens, makes it essential to the nation that the industry remains sound, providing continuing and hopefully expanding employment to its work force and financial strength to the Bermudian economy.

"The recent closure of two hotels, the talk of future closures, the declining duration of hotel stays, the unsteady levels of guest visits, and the dependence of the industry on the economic health of the US economy and the vacationing whims of the American public constitute an uncertain environment in which we must consider the issue of wages.''