Plans by the University of Sheffield to create a limited company to run new shops, cafes and conference venues will reduce wages for the sector's lowest-paid staff, unions have claimed.

People working in catering, bars, hospitality and conferences at Sheffield are currently employed by the university's Accommodation and Commercial Services arm.

But staff starting at six new venues, expected to open over the next two years, will not be employed directly by Sheffield.

Instead, they will be recruited by a wholly owned subsidiary of Sheffield that will offer different terms and conditions from existing staff employed on other campus outlets.

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An internal briefing document on the new company, Sheffield Trading Services, explains that the business model "provides a 12 per cent saving compared to operating the business units using University salary costs".

The current 74 ACS employees will not be affected by the changes, but the report proposes that "all new casual workers across the ACS portfolio will be engaged by the limited company".

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The report forecasts that the new company will turn over ?3 million a year by 2016-17, while ACS will have an income of ?4 million that year.

But the new business will be more profitable because it can "better manage and control direct operational costs, particularly payroll", while also retaining the university's 20 per cent VAT rebate, the report notes.

Mike Robinson, national officer for Unite's education sector, which represents higher education support staff, said: "These proposals to set up a 'special purpose vehicle' are deliberately designed to remove other benefits, such as a decent sick-pay scheme and standard negotiated grade rates for those working in the higher education sector.

"They represent the unacceptable face of commercial dealings at a once-proud university, now resorting to taking shillings from low-paid workers. It is a new low, the nadir of a sector that has raced to the bottom for low-paid staff, who themselves have no fair access to a university academic education.

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"I hope the management at Sheffield will think again. However, grubby profit seems the only motive for these changes."

In February, the union criticised the decision to increase the 2010-11 pay and pensions package of Keith Burnett, Sheffield's vice-chancellor, by almost 6 per cent to ?311,000, in the same year that the university reduced the value of pensions for its lowest-paid staff.

A Sheffield Trading Services spokeswoman said the company would "operate brand-new hospitality and retail services" and "enable the creation of new jobs".

"These opportunities are for new staff, offering a comprehensive reward and recognition package that is competitive within the hospitality and retail sectors," she said.

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"Spin-out companies working in conjunction with universities are commonplace within the sector."

The company would also help students and local people by increasing "opportunities for work experience, apprenticeships and internships, which otherwise would not be available", she added.

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jack.grove@tsleducation.com.