Employment (Allocation of Tips) Bill
Friday 15th July 2022
(2 years, 4 months ago)
Commons ChamberRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Dean Russell (Watford) (Con)
I beg to move, That the Bill be now read a Second time.
I am incredibly pleased that we have time today to debate this important issue and Bill. I am the Member of Parliament for Watford, which has a thriving hospitality and service sector. That means that many of my constituents, and those from surrounding areas, work in roles where tips, gratuities and service charges are given to them—for the simplicity of my speech I will refer to those things as tips from now on, rather than give the full list.
For individuals who work in those roles, tips are an important part of receiving a thank you, and in many cases they are a token gesture from customers. Across Watford, not only do many people working in hospitality receive tips, but probably everyone—we are a very generous constituency—will have given a tip over the past few years. I was shocked when I found out, especially during the summer period after lockdown when we could reopen restaurants and were able to go back out and give tips, that hospitality workers could not necessarily guarantee that they could keep them. I think most people would be shocked to know that if they gave a tip through the business—via a credit card, say, as is increasingly more prominent and popular—there is no guarantee that the person or team they gave it to would receive it.
Of course, in most instances businesses are fair and kind and ensure that those tips get to the staff who were given them. Sadly, however, we know that there are always those who are unscrupulous and unfair and will choose to exploit their staff and keep the tips for themselves, sometimes in part, sometimes in full.
Ms Lyn Brown (West Ham) (Lab)
I congratulate the hon. Gentleman on bringing forward this Bill. It is certainly one I support, and hopefully a final victory for the long-running fair tips campaign run by Unite the Union. As he says, however, we know that some employers can be extraordinarily devious in exploiting loopholes in employment law at the expense of either the public purse or workers. What consideration is he giving to future-proofing this Bill to make it really difficult for operators, including those using digital platforms such as Deliveroo, for example, to avoid the spirit of such important legislation?
Dean Russell
I thank the hon. Member—I would like to say friend—for her question. I will come to that later, but it sits within the code of practice and ensuring that at the heart of this Bill is a word she will hear me repeat many times: fairness. That is baked into the approach that will be taken. As I will say later, I am looking forward to meeting businesses, sector representatives and unions to chat about how we make that code of practice work well and ensure it is fair for everyone involved.
As hon. Members will know, over the past few months media reports have highlighted that the taking of tips, especially via credit cards, and businesses taking more than their fair share—indeed, taking a share of something they should not even be getting—is increasing. One of the reasons that concerns me, and why this Bill is so important not just in principle but right now and should be enacted as soon as possible, is that we are seeing a rise in the cost of living.
People who work in hospitality should not need to rely on tips as part of their salary. I am absolutely clear in the Bill that it is not about topping up salaries; it is about a gratuity, tip or service charge in addition. However, employees should be able to keep them. That should be at the heart of what we do, and that is what this Bill will do. That is why I say that fairness is key, because we all have a sense of fairness. We know what is right and wrong, and we know that if we give somebody some money to say thank you, they should be able to keep that money or choose to share it with others. That is key. A great deal of work has been done over the past few weeks to try to get this proposed legislation right, and I hope that people will see that in the Bill and that the code of practice will cover that.
Mary Robinson (Cheadle) (Con)
I am grateful to my hon. Friend for bringing this important and overdue Bill to the House. We are all thinking of the people in hospitality who will benefit from it. I have been contacted by constituents who have had up to 15% of tips removed from their pay packet. Obviously, this Bill will address that. However, this measure will also matter to members of the public too. How many of us ask when we go to pay our bill, “Will the tips go directly to the person who has given us such great service tonight?” yet do not know whether the answer we get will be correct? This Bill will ensure that we have that security and that people paying their bill can trust that that tip will go to the person who has given them that service. I hope that my hon. Friend will have every success with this Bill, and that it will be backed up with a media campaign to let people know that their tips will go to the person who actually deserves them.
Dean Russell
My hon. Friend makes a brilliant point. I thank her so much for her endorsement and support, and for representing her constituents. I have heard the same stories from so many Members. In fact, a lot of Members—I will not name them—tell me that they worked in hospitality when they were students, and have experienced this issue; it really cuts through. On my hon. Friend’s point about a media campaign, I invite colleagues from across the House to help me promote this legislation as widely as possible. I hope that in a year’s time—hopefully sooner, but it might be a bit later—we get to the day when a customer never again has to ask, “Will you definitely be able to keep this tip?” That is one of the ambitions of the Bill.
The Bill is not about bashing business. Most businesses comprise good people, good entrepreneurs and good CEOs, and most pass on tips fairly. The businesses that I have spoken to—especially in my constituency and through fantastic Members of Parliament across the House—support the legislation, and hospitality businesses definitely do so.
Let me turn to fairness for workers, which is covered in several aspects of the Bill.
Christina Rees (Neath) (Lab/Co-op)
I congratulate the hon. Member on bringing this excellent Bill to the House. Fairness is the key word. He has mentioned that he is working with businesses and trade unions. I am a Labour and Co-operative party MP. May I ask whether he has reached out to the Co-operative party? Many businesses are co-operatives, and I am sure the Co-operative party would be grateful if he reached out to it.
Dean Russell
The hon. Member makes a brilliant point. The idea of the code of practice is to ensure that we do that engagement, and I am hopeful that when we reach out to such organisations, they will help with the media campaign. We need to ensure that everybody knows about the legislation and to highlight that there are businesses that do not pass on tips. In the meantime, I hope that people challenge businesses on that when they speak to them.
The Bill will provide greater transparency for employers and workers in teams regarding how tips should be treated; that will be clear to everyone. It will create a level playing field for the majority of businesses that already pass on tips to workers fairly and transparently, ensuring that they know that other businesses will do the same as they have always done. As we have already mentioned, through the Bill consumers will have the confidence that the full value of their tips will go to workers, and the premise of the Bill is that 100% of tips will go to the workers. The code of practice will agree how that will be shared, and we can turn to that point later.
Jill Mortimer (Hartlepool) (Con)
May I speak on behalf of all the backroom staff in hospitality venues? As a teenager, my son worked for many years as a pot washer for very little money, but he always felt really appreciated when he got the little top-up that was his share of the tips. We should remember all those people and how important it is to them to know that they are valued.
Dean Russell
Absolutely. I thank my hon. Friend for her contribution. May I also mention the fabulous staff in this place? I know that on occasion, some very kind Members of Parliament do give tips, even though it might not be reported.
I have covered some points around fairness for workers, but I will go into a little more detail. The Bill will create a legal obligation for employers that receive tips directly from customers, or that have control or significant influence over the distribution of tips that workers receive directly, to distribute tips to workers fairly and transparently. The obligation will be attached to the total amount of the qualifying tips paid at, or otherwise attributable to, an employer’s place of business, and the tips must be allocated fairly between workers at that place of business. For example, in the case of a big chain, the tip will go into a pot to be distributed to everyone who works not in the chain, but at that particular venue.
Importantly, the situation will remain the same in cases where employers do not receive, or have control or significant influence over, tips. For example, the Bill will not cover me giving a tenner directly to a waiter or waitress at the end of a meal, as it is clear that it is for them. However, the Bill would come into force if they put the money through the business, perhaps via a credit card payment. Similarly, the Bill will not cover situations where employees already have their own tip jar that they look after, because those tips will not be touched by the business.
Fairness is key to ensuring that businesses and employees know exactly where they stand, but we also need to ensure that there is some flexibility. Every business is different—that is the nature of it. Someone working in hairdressing is going to have a different approach to the way they receive or manage tips from someone who works in a restaurant, bar or hotel. What we are trying to do with the code of conduct is to make sure that that is covered, and I hope that is going to come after this Bill today—
Mark Jenkinson (Workington) (Con)
I am sorry to interrupt my hon. Friend in mid flow. As someone who has had many an argument with restaurant managers about removing service charges in London, in order to be able to give cash directly to staff, and nearly been thrown out of restaurants for it, may I put on record my congratulations to him on bringing this Bill to the House today? Let me also add my thanks on behalf of all the hospitality industry workers in my constituency and across the wider Cumbrian area who will benefit from this.
Dean Russell
I thank my hon. Friend for that. He stands up so strongly for workers and for the rights of people across this whole country, but particularly in his constituency. I am very conscious that there is a thing called the tronc system, although I will not go into too much detail on it now because of the time available. Tronc is an arrangement commonly used in the hospitality sector, where an employer delegates the collection, allocation and distribution of tips to a person or persons known as a “troncmaster” or tronc operator. The Bill does not seek to regulate the operators of independent tronc systems, which are commonly used by many businesses already. However, I raised this matter when I was talking through how to make this Bill the best it can be and I found that some stakeholders have been concerned about whether a business could then put pressure on a troncmaster to do something that is unfair. So, to mitigate that risk, under this Bill workers can bring an employment tribunal claim if an employer’s use of an independent tronc is not fair. I hope that that will capture any concerns on that front.
As we have just discussed briefly, another aspect of fairness is ensuring that there are no deductions from tips. So at the core of the Bill is the creation of a legal obligation for employers to distribute all tips, gratuities and service charges to workers, without any deductions. When customers pay service charges, they expect that money to go in full to the staff and to the individuals they have asked it to go to. Sadly, some employers retain part or the whole service charge without passing it on to their workers, so this Bill will deal with that. Some hon. Members have asked me whether this legislation will also cover credit card deductions and administrative costs, and some businesses have raised that issue with me too. Since 2018, payment processing fees cannot be passed on to consumers. In line with that, employers will not be able to deduct payment processing fees from tips––that also includes mandatory and discretionary service charges which are added automatically on to customers’ bills by some hospitality venues. My hon. Friend the Member for Workington (Mark Jenkinson) will be relieved that that will no longer be the case, as he has probably had arguments on that front in the past. Administering tips should not impose significantly on a business’s operating costs, but that credit card admin charge might be significant for an individual. Two or three payments can be significant for an individual when we are talking about tips. So, again, this is about fairness; businesses do not incur a significant cost in respect of this money from tips, but if it were taken off the staff, it would be significant for them. It is important to include that provision in the Bill and to put what I have just set out on the record.
Ensuring that tips are passed on to workers in full, with no deductions by employers, will make a real difference to workers’ lives, while not creating a burden on businesses. As I noted earlier, an important practical aspect of the Bill will be the code of practice, which I will expand upon now for a few moments. The Bill includes provisions for the Secretary of State to issue a statutory code of practice, which will promote fairness and transparency in relation to the distribution of qualifying tips, and help tribunals determine whether it is fair for an employer to make certain tronc arrangements. Employment tribunals must have regard to relevant provisions of the code when determining whether an allocation of tips or making of certain tronc arrangements is fair. The code will consider some of the factors that may be relevant to fairness and will provide a number of examples and real-life scenarios that exemplify fair tipping practices, to help reflect the myriad circumstances in which employers can handle tips in an acceptable fashion. The hon. Member for Neath (Christina Rees) mentioned engagement, so let me say that the code will be published in draft and consulted on before the relevant sections of this legislation come into force. The code will also require approval from both Houses of Parliament. I hope that that reassures colleagues across the House that there will be scrutiny and that we will ensure that it is covered fully. The defining principles of the Bill will need to capture the nuances of fairness. As I have mentioned, I want to engage widely to ensure that the code of practice really works. I welcome anyone reaching out to me after Second Reading. If the Government and the Minister support the Bill going through to the next stage, and the House joins us in that approach, I will be really keen to engage and hear hon. Members’ points.
One of the core issues is remedies and enforcement. Crucially, the Bill will be enforced by workers through the employment tribunal system and will provide employment tribunals with remedies where an employer has made deductions from tips or has not allocated tips in a fair and transparent way. If an employer does not allocate tips fairly among workers, the employment tribunal can make an order that does one of three things: require the employer to revise any allocation of tips that they have made, recommend that the employer deals with tips in a certain way, or require the employer to make a payment to one or more workers so that they receive the tips that they should have received.
The employment tribunal may additionally compensate workers by up to £5,000 for related financial loss attributable to a breach of the provisions. Workers will also be able to make a complaint to an employment tribunal if their employer does not keep sufficient records relating to tipping practices; the tribunal can order the employer to compensate workers by up to £5,000. It is worth noting that workers must consult ACAS before bringing forward a claim. The majority of employment disputes are settled before they reach an employment tribunal.
I would like it to be absolutely clear that nothing in the Bill will make changes to taxation for employers or employees. It is purely about employees’ rights and workers’ rights.
I will conclude my remarks because I want to hear the fantastic speeches that are no doubt coming up. I thank the Minister and her predecessor, my hon. Friend the Member for Sutton and Cheam (Paul Scully), for their incredible support with the Bill; I hope that I can convince colleagues to get it over the line today. I thank everyone who has helped me to introduce it to the House: hon. Members past and present, constituents and my fabulous Watford businesses and residents, who have repeatedly raised the importance of the issue. As we are all aware, the private Members’ Bill process is fragile, so I am keen to work with all hon. Members, all organisations and everyone I can to make sure that the Bill works. I urge the Minister to support it.
Mr Deputy Speaker (Mr Nigel Evans)
We have all learned a new word today: “tronc”, which I will try in Wordle later.
Felicity Buchan (Kensington) (Con)
I apologise if I sound repetitive, but I said I supported the previous Bill today because it was the right thing to do, and I support this Bill because it is the right thing to do. I think my constituents, who probably spend quite a lot of their take-home pay in restaurants and bars, would be very shocked if they learned that their tips, whether or not made by credit card, are actually the legal property of the restaurant owner. That would really surprise people.
The timing of the Bill is important because hospitality clearly faces major challenges, particularly in recruiting staff. The more we can professionalise the hospitality sector and its employment practices, the better: it will make it more likely that restaurants and bars can be fully staffed. That is very important to me, because I represent a central London constituency. My constituency of Kensington and that of my neighbours in Westminster probably has the greatest density of restaurants, bars and other leisure facilities so the Bill is very important to residents.
I was shocked to hear that my local gastropub is no longer able to open on a Monday or Tuesday, not because it does not have the clientele—it is always overbooked, with people waiting for tables—but simply because it cannot get the staff. We cannot have a situation in which businesses, which are so important for livelihoods and for the general economy, cannot operate because they cannot hire staff. The Bill will go a small way towards making the hospitality sector more attractive to staff because they will have a legal entitlement to tips and will not simply have to wait for their employer to do the right thing.
Staffing in this sector is going to be so important going forward. We need to ensure that we have workers who can keep the economy going. In London the tourist season is beginning to start again. I am delighted to see in my constituency that not only domestic tourists but lots of international tourists are returning. So it is important that restaurants, bars and other leisure units can continue to function.
Doing the right thing is critical, and professionalising the industry is also very important. This is good timing, because as we are all aware, workers are suffering from the effects of global inflation—it is global; it is not a UK issue. So it is very important that employees are getting the proper pay package. I was shocked to hear that in the past some employers even used tips to make up the minimum wage. Clearly, that is no longer happening. It has been ruled out, but it is important that the intention of consumers is fulfilled. The intention of consumers is important. When I eat out, I give an extra 12.5%, not because I think that my burger should have cost 12.5% more but because I think that the waiter and the other staff deserve that extra remuneration.
The statutory code of conduct will be critical; we should not diminish its significance. How tips are allocated among staff will be important. Lots of staff work in these establishments, not simply the waiter who comes to the table. So getting the fair balance between the frontline and backline staff is going to be important. We should not diminish the significance of that. I am well aware that the Bill is just one step, and getting the details right is going to be critical.
My hon. Friend the Member for Watford (Dean Russell) spoke about the consultation that he has already done, but I encourage him to ensure that the detailed consultation carries forward. I am well aware that lots of restaurants are hierarchical institutions and perhaps the person who cleans the dishes in the back of the kitchen is not recognised to the same extent. However, clearly that person is integral to the restaurant. We, as consumers, may not see them, but they are critical and it is important that they are recognised.
I very much welcome the Bill, and it is shocking that the provision is not already the law. I appreciate the efforts of my hon. Friend the Member for Watford (Dean Russell), who introduced this Bill in 2021 but dropped it in anticipation of the employment Bill. Although I am sure the employment Bill will happen at some point, it was not in the Queen’s Speech, so it is good that my hon. Friend has introduced this private Member’s Bill.
This Bill is a great first step in getting things right for employees, but it is also an important step in ensuring employers are on a level footing and trading on an equal basis. Restaurants that do the wrong thing by their staff should not be in a better competitive situation because they are able to offer cheaper prices to consumers. This Bill is good not only for employees but for employers, because it puts everyone on the same footing and ensures that employers do right not only by their employees but by their consumers, who give tips in the full expectation that they are paid to employees.
I am fully supportive of this Bill. There is no question but that it is the right thing to do. It is important for my constituency, where so much of the economy is made up of restaurants and bars in the night-time economy. I am very grateful for the Bill on behalf of my constituents.
The Bill is also important because it further professionalises the sector, and we will find that many employment practices have to be professionalised in the post-coronavirus world, because only then will employers be able to recruit staff. In every regard, this is an important Bill that formalises what we all think is right, that employees should be able to retain their tips. The Bill fulfils the expectation of every consumer when they go out to eat and drink, and long may that continue.
Wes Streeting (Ilford North) (Lab)
On a point of order, Mr Deputy Speaker. The Met Office has issued its first ever red warning for the heatwave that the country is likely to experience on Monday and Tuesday next week. Has the Department of Health and Social Care given you any notice of its intention to make a statement to this House about the health consequences for the public, not least given that this red warning means there is likely to be a risk to life?
Of course, our newspapers, television screens and airwaves are full of reports of overwhelmed ambulance services and accident and emergency departments. Given that the Secretary of State for Health and Social Care failed to answer my urgent question on Wednesday, I would have thought that invisible man might make an appearance today to advise and reassure the public that our public services and emergency services will be able to cope in the light of this emergency.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the hon. Gentleman for his point of order, and for giving me forward notice. I have been given no notification that there will be a statement from the Department of Health and Social Care, or any other Department, today. Should that change, the House will be informed in the usual manner via the annunciators.
It is timely that the hon. Gentleman makes this point of order, as people should take advice in these unusual circumstances. People should take water with them when they travel, they should make sure there is plenty of ventilation and they should seek attention if they are feeling unwell. I thank him again for his point of order.
Darren Henry (Broxtowe) (Con)
I thank my hon. Friend the Member for Watford (Dean Russell) for presenting the Bill, and for allowing me to contribute to the debate.
I often tip, whether it is the barber or someone in a restaurant or pub, and I enjoy tipping, because I want to reward the people who have worked so hard to give me good service. It is always my hope and intention that the tip will go to the worker who has provided the service that day. Conversely, I would rather not tip someone who had provided a surly or otherwise poor service. In a restaurant in Broxtowe, for instance, I want my tip to go to the waiters and chefs in recognition of, and gratitude for, their great service. I am therefore delighted that the Bill seeks to create a legal obligation on employers to allocate “tips, gratuities and service charges” to workers, without any deductions.
This situation—the unfair distribution of tips—has been going on for a while now. It was in 2015 that the then Business Secretary, my right hon. Friend the Member for Bromsgrove (Sajid Javid), launched an investigation of the abuse of tipping practices. I know that many employers rightly give the tips to their workers, but my hon. Friend seeks to create a level playing field through legislation, which will not only make competition fairer for businesses, but ensure fairness for the employees who work so hard.
I am pleased that the Bill draws attention to this issue, especially given the immense suffering that the hospitality sector had to endure as a result of covid-19. It will ensure that we maintain the incentives for people to work in the sector, and aid its continued recovery following covid, and I congratulate my hon. Friend again on presenting it.
Jill Mortimer (Hartlepool) (Con)
I congratulate my hon. Friend the Member for Watford (Dean Russell) on this important and necessary Bill. Let me echo his sentiments in saying how great it is that after more than two years of lockdowns and restrictions, we are once again talking about visiting our fantastic local restaurants, pubs and other hospitality venues. We have no shortage of those in Hartlepool: Portofino, The Pier Restaurant, Sambuca, The Owl, No 8 and Juniper Lounge—all of them just a short step away from my office—along with LilyAnne’s and the fabulous Railway Café, run by Lesley. I urge anyone who is able to do so to take advantage of this wonderful weather and visit our marina In Hartlepool, because it will be like the Riviera there this weekend.
The employees in all these venues always provide an excellent service and work extremely hard. They deserve every penny of their tips, and I know that their employers—and, indeed, most small businesses—agree with me. Unfortunately, some businesses, usually the larger high-street chains, do not pass on gratuities to their staff. No one wants to see that extra service charge on their Bill and have to wonder whether the money will go to the person who has provided the service. I have done the same as my hon. Friend the Member for Workington (Mark Jenkinson): I have said quietly to the server, “Will this come to you?” and if I see a nervous shrug, I ask for the charge to be removed and I give the person cash. These are often young people, including students who are topping up their incomes by working their way through university or college. We need to ensure that they receive the money that they deserve.
The Bill will ensure that tips are always passed on to employees and divided fairly, and I am proud to be supporting it. As inflation and the cost of living increase, it is more important than ever for hospitality staff in Hartlepool and elsewhere to keep their tips. I realise that some businesses fear that these changes may have a negative impact on their finances—that is why it is so important that we continue to support them through the aftermath of the pandemic, as indeed we are—but I am also aware that businesses which ensure that their staff are properly rewarded for hard work and providing service with a smile will, in the long term, increase their customer base, their revenue and their income. I know I go back to places where I like the staff and get to know them. The bar where everybody knows your name is the one you always want to go to.
Rewarding hard work and good customer service would also ensure a welcoming and friendly atmosphere in our hospitality venues, encouraging more people to come together in our pubs, restaurants and cafés, and thereby strengthening our communities and social fabric. For too long, people have stayed at home watching Netflix, and they need to go out and talk to one another again. It is so important, especially after covid restrictions and being confined to our homes, that we promote measures that enhance our sense of community, which has always been strong in Hartlepool, and I am sure this Bill will do exactly that. This Bill is certainly overdue, and I am glad to be supporting it today.
Edward Argar (Charnwood) (Con)
I very much welcome the Bill from my hon. Friend the Member for Watford (Dean Russell). As you will know, Mr Deputy Speaker, he is nothing if not persistent once he has a cause to pursue. I recall that he introduced this Bill in 2021, and as it did not proceed into law at that stage, he is back again and determined to get it through the House on this occasion. I am very happy to be here today to support him in that endeavour.
A lot of the speeches have focused on the hospitality industry—restaurants, bars and similar—but of course, as has been mentioned, this issue is drawn more widely than that and goes across the broader service industry of hairdressing, barbers and so on. A whole range of services are impacted by the issue that my hon. Friend is highlighting today.
Many of our constituents will be unaware, and would be surprised were they made aware, that there is no law—no statute—that directly addresses this issue, and that tips or service charges paid through the business are legally the property of that business. Therefore, it is down to the good will of that business or the approach of that business to ensure that tips get to the staff for whom they are intended. There is no statutory protection of that currently.
Yet as my hon. Friend and my hon. Friend the Member for Kensington (Felicity Buchan) have said, when any of us or any of our constituents go to a restaurant or the barber and pay a tip, we do it because we want to reflect to the members of staff who have provided exceptional service or courteous and friendly service to us that we recognise that service and want to reward them directly for it.
I take the point made by my hon. Friend the Member for Kensington, which is absolutely right, that this is not just about those who are front of house with whom we interact, but about the people in the kitchen, those doing the washing up, and a whole range of others who play a key part in the experience we have enjoyed. It is right that tips are distributed fairly among those who have played a role in our experience. None the less, we expect those tips or service charges to go to those people who have done the work for us, so I very much welcome the Bill.
My hon. Friend the Member for Watford was absolutely right to highlight throughout his speech the word “fairness”, and the Bill goes to the heart of that. It is about fairness to those who are providing the exceptional service and fairness to consumers who believe that the tips and service charges they are paying will go to those individuals. At this point, I should of course pay tribute to the campaigners and to the staff who do the amazing job. I also pay tribute—as the hon. Member for West Ham (Ms Brown), who is not in her place at the moment, highlighted—to Unite the union and others who have been pressing this issue.
When I first entered the House in 2015, this was one of the issues running hot in the news. At that stage, the evidence suggested that about two thirds of employers took some form of deduction from tips or service charges, and sometimes as much as 10%. Of course, there has been progress since then, which is very welcome. However, during the pandemic, people developed behaviours—I do not think they have changed subsequently —of paying for things less with cash and more with cards, therefore putting any tips or additional money through the business in that way. I think the Bill is very timely, and it is the right thing to do.
As has been set out, the Bill creates a legal obligation essentially to allocate tips fairly. Rightly, it does that through a statutory code of practice. That is the right mechanism because it allows for a degree of flexibility and the code to be developed in slightly slower time. There will be complexities, which hon. Members have highlighted, relating to businesses and how to define particular elements, so that is the right approach in such a complex landscape.
The other point highlighted is about people—staff and consumers—being aware. Transparency is vital in this space, so I welcome the inclusion, in the opening remarks from my hon. Friend the Member for Watford, of a written policy that gives people transparency and an understanding of what they can expect, but also—
Jill Mortimer
Does my hon. Friend agree that that is one of the greatest problems with this? Relatively recently, we have always had on bills an optional service charge that is anything but optional. Many people pay it without even really looking at it or considering it, and no one knows if the money goes where it is intended to go and should go. The Bill will make the very important change that we need.
Edward Argar
My hon. Friend is absolutely right. That goes to the heart of transparency and openness to the consumer but also to those working in this context. My hon. Friend the Member for Watford, in drafting and presenting the Bill, has, as ever, been diligent. He has set out the route to an employment tribunal, which will be an option, and given those tribunals the remedies they need to make redress, should they find a particular employer has not complied with both the spirit and the letter of the Bill and the code of practice.
From my understanding of the Bill, this is hugely important. The Bill has only 15 clauses, but they are important and tightly drafted. It addresses not just the passing on of tips and service charges without their being top-sliced and deducted, but the vital need for fairness in how they are distributed between staff.
I am absolutely delighted to support my hon. Friend’s Bill. It is about fairness to consumers, but most importantly fairness to the staff who day in, day out provide all of us with exceptional service. They have been through a challenging time. It is important that we recognise this in statute. I suspect many businesses do the right thing and it is always a shame when one has to legislate, but it is right, just as with the previous Bill we debated, to do the right thing by those who provide exceptional and courteous service to us. It is about the kind of society we wish to see and the approach we wish to see within that society. I welcome my hon. Friend’s Bill. He has my complete support and I very much hope that it will have a smooth and swift passage on to the statute book.
Saqib Bhatti (Meriden) (Con)
I pay tribute to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Loughborough (Jane Hunt). This is the first time I have had the chance to speak with her at the Dispatch Box. I worked closely with her while chairing the all-party parliamentary group for small and micro businesses. She was the vice-chair and was always a great source of support and an advocate for small and micro businesses. I wish her all the best and long may it continue.
I also pay tribute to my hon. Friend the Member for Watford (Dean Russell) for doggedly pursuing this agenda and pushing the Bill. The west midlands has been known for its great exports over many centuries. You may not know this, Mr Deputy Speaker, but my hon. Friend was born in my constituency, so I am glad to count him as one of the exports that is continuing to do great things in Parliament and for the people of Watford. I thank him for bringing the Bill forward. As my hon. Friend the Member for Charnwood (Edward Argar) said, it is about equity and fairness. My hon. Friend the Member for Watford has pursued this agenda and made sure that the Government recognise the importance of tips in the lives of hospitality workers. I must say, I am a bit surprised that we are even having to have this debate. So many times when I have experienced the great hospitality in my constituency, I have wondered whether my tips actually reach workers’ pockets, and whether a service charge goes to the employees or is for the services that the business—the employer—is providing.
I am pleased that there will be a code of practice to try to address the imbalance in equity and fairness. My hon. Friend the Member for Charnwood said that the majority of businesses do the right thing, and we should recognise that. The majority of hospitality businesses make sure that their staff are taken care of and instil equity and fairness, but clearly that is not the case right across the sector, which is why we need the Bill.
It may well be that we are not a tipping society. Across the pond in the United States, tipping is an integral part of the hospitality sector. When I or my friends have been there, we have always been told, “Please make sure that you tip, because it is part of the income of hospitality sector workers”. It would be remiss of me not to recognise the Government’s great work in getting the national living wage to where it is, but tips are a necessary add-on. Given where inflation is, the Bill is a timely way of addressing issues of equity and fairness.
I have a number of points to raise with the Minister, and I am sure she will address them. On service charges and the code of practice, when I speak to hospitality businesses, they tell me they have not had an easy time over the past few years. It has been incredibly challenging, for obvious reasons—lockdowns are not a friend to many parts of the economy, but specifically to businesses in the hospitality sector. They have had to try to survive, and many have been grateful for the support that the Government have given them, whether business rates relief, bounce back loans or the furlough scheme. Those have all been great assets. I was intrigued to learn that where businesses in the hospitality sector were able to take advantage of the furlough scheme, many of their workers ended up getting second jobs and then did not return to the original employer because they were being paid much more. That has contributed to a significant shortage of workers in the sector—a shortage that was already there pre covid. The issues with skills are of long standing, but they have been made more acute by the decisions that people have had to make during covid.
In that context, a tipping system that is in statute, supported by a code of practice, and embodies elements of fairness, equity and justice—those quintessential British values—will certainly go some way to addressing the acute skills shortage, so it could be an asset to the hospitality sector’s ability to start recruiting again. It is not the only way we need to address the issue, and I am sure the Minister will be working hard to look at that, but it will provide great support. I hope she can provide some clarity on that.
The other aspect of the Bill is service charges. I am less confrontational than my hon. Friend the Member for Workington (Mark Jenkinson), and I sometimes do pay the service charge, not knowing whether I can or should challenge it. Perhaps I should channel my inner Workington man—
Saqib Bhatti
Indeed. However, the question still stands: if a business deems a service charge necessary for the service that it provides, how will that be addressed? What I do not want to see is an additional line with a new name, adding a new cost that consumers have to pay. That may well undermine the notion that we should tip, because we will already be subjected to another percentage fee. Perhaps that is something that the code of practice will look at.
While I have the Minister’s ear, let me reflect on a roundtable I attended in the past two to three weeks at Nailcote Hall, which is a great hospitality venue. Meriden, bordering Birmingham and Coventry in a beautiful setting in the west midlands, and with the airport and great connections, is a great place for hospitality businesses to flourish. When things are great, it is fantastic to see the hospitality sector thriving, but in the post-covid world, a lot of my inbox has been taken up trying to address the issues that those businesses face. In the early days of covid, that meant trying to get liquidity and loans to help them survive and then thrive, and now it means helping them through the issues that they currently face.
The hospitality sector wanted me to send a clear message to the Government that while they have had a reasonably good period of post-covid recovery, during which people have returned, a lot of work still needs to be done. We should not underestimate the damage that covid has done to the hospitality sector. I return to the point about having clarity in the code of practice. I think hospitality businesses would welcome that guidance.
On that note, I pay tribute again not just to hospitality workers but to the majority of businesses that recognise how important their workers are, how important retention is and how important it is to create an environment in which they are able to recruit. The staff, of course, make up and define a business, and for the businesses that do not have a good environment, their reputation gets out there. I wish we did not need this Bill. Businesses should be doing the right thing. The majority of businesses do; I understand why they do that. I would welcome a meeting with the Minister to discuss some of the issues around the hospitality sector and what more we can do.
Finally, let me reflect on something that my father always said—I say “said”; he still runs the business and adheres to this. He always says, “If you take care of your staff for even one day, they’ll take care of you for a lifetime.” That is certainly the approach that I took in business, and I hope that I can take it forward in whatever roles I have throughout my life.
Kerry McCarthy (Bristol East) (Lab)
I congratulate the hon. Member for Watford (Dean Russell) on bringing the Bill forward and on securing a place in the ballot so that it stands a chance of becoming law. I also thank the hon. Members for Kensington (Felicity Buchan), for Broxtowe (Darren Henry), for Hartlepool (Jill Mortimer), for Charnwood (Edward Argar) and for Meriden (Saqib Bhatti) for their contributions. They all have very simple, one-word constituency names, which is quite a relief after the previous debate.
There was a common theme in all those speeches: customers want to do the right thing by the serving staff and other people who deserve tips—hairdressers, people in nail bars or whatever—but it is sometimes difficult to be sure that the money we give because we want to reward the person who served us will go to that person. This is very much a question of fairness and wanting to treat people right.
In the previous debate, we talked about how all employers would probably want to do the right thing by a member of staff whose child was born prematurely or was sick, but that they might not be in a position financially to do so. I think this is a slightly different situation, because there is not really an excuse for not passing tips on to staff, even if a hospitality business is struggling. We know there are pressures on them from business rates, the impact of covid closures and staff shortages. Speaking to people in the restaurant trade, another pressure is the cost of some of the basic ingredients and such things as fuel bills. We know that they are under pressure, but no matter what, that is not an excuse for holding on to tips that deserve to go to the people who are being tipped.
The issue affects so many people. About 2.5 million people work in the hospitality sector, representing more than 7% of the workforce. As we have heard, often they are younger people, and it tends to be an ethnically diverse workforce. Because of the turnover in the sector—in some ways it is a casual job, often on zero-hours contracts, and there is often illegal working as well, and there is a job to be done in trying to stamp that out—the workforce are particularly vulnerable to exploitation and not being able to assert their rights.
I pay tribute to Unite the union in particular. It is a difficult sector to organise in, because it is not like one big factory with a workforce who tend to be there long term, who all identify with each other and who are in the same place. It can be difficult to fight for people’s rights in this sector, but Unite has done a good job. There was a case recently where Pizza Express was found to be deducting 50% of card tips from its staff who were on minimum wage. That was reducing their incomes by about £2,000 a year. Thanks to Unite taking action, the policy was scrapped and the company has now returned to a more equitable system where front of house staff keep 70% of the tips they make. Anyone going to Pizza Express would not have been expecting that sort of practice to be going on, and it is good that that changed. It was reported that some workers cried in relief when the change was made, because having those tips makes the difference between them being able to get by and not.
I think it was the hon. Member for Kensington who talked about the national minimum wage, which was introduced by the Labour Government, and in 2009 we had to make it illegal for tips to contribute to the national minimum wage. That was the right thing to do, and I am proud that we did that when we were in government, just as I am proud that we introduced the national minimum wage to begin with. As we are all being consensual and working cross-party today, I will not dwell on how difficult it was to get the national minimum wage through. You were probably here at the time, Mr Deputy Speaker, but it was before I was elected. I gather that the debates went all through the night, people had to sleep in their offices and it was difficult, but I am glad that we have converted those on the Government Benches and they now accept it. I genuinely mean that. The fact that Conservatives are now boasting about support for the living wage shows that we won the argument, and I welcome their support for Labour policies. I hope that after the next election, they will be on this side of the House supporting everything that we do.
As I have said, so many people work in the hospitality and tourism sectors, and many of them are vulnerable to being exploited. The Resolution Foundation reported that in 2019, 52% of workers in the hospitality sector were low paid compared with 15% of all workers. The sectors are hard-hit by the pandemic, and tips can make a huge difference. It is disappointing, as with the previous Bill we considered today, that this issue has not been addressed as part of the employment Bill we were expecting from the Government, but that was shelved ahead of the Queen’s Speech. The hon. Member for Watford shelved his previous attempt to get a Bill on this issue through because he was expecting it to be covered in the employment Bill. There is so much that we could legislate for. The Government promised action in 2016, and again in 2018, and it was in the 2019 manifesto.
I remember that after my hon. Friend the Member for Bristol North West (Darren Jones), who cannot be here today, was first elected in 2017, he had a Westminster Hall debate on this subject. It was he who first introduced me to the word “tronc”. Every time we were in the Tea Room, he seemed to want to talk to me about troncs. This debate has brought back memories. He did very well in coming near the top of the private Member’s Bills ballot a few years ago and wanted to introduce a Bill on tips, but he also wanted to introduce a Bill that would become law, because that does not happen often: I have been here 17 years and I have never managed to get a place in the ballot. When he spoke to the Department, it would not support his Bill, so he introduced something else that was very worthy but would not get much attention, because he wanted to do something the Government would support.
I think it was 2020 when my hon. Friend introduced his other Bill, so it is excellent that something has moved since then, and I am glad the Government have now managed to find a working arrangement with the hon. Member for Watford. He detailed some of the concerns that will have to be addressed in Committee, as did other hon. Members. There are some things still to be thrashed out, but I hope that Labour members of that Committee will be able to be part of a constructive working relationship and that we will get this Bill into law as soon as possible, so that the people on the receiving end of the tips can start to see the benefit.
Mr Deputy Speaker (Mr Nigel Evans)
I should have said this during the last debate, but I will say it now: I welcome the Minister to her new role.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jane Hunt)
Thank you very much indeed, Mr Deputy Speaker.
I thank my hon. Friend the Member for Watford (Dean Russell) for bringing this important Bill forward. He is well known for his hard work both for his Watford constituents and in supporting his colleagues, but now he will possibly be able to transform the whole country, based on this work.
I am pleased to confirm that the Government will support this Bill. Bringing these new rules into force will give new protections to millions of workers in industries where tipping is common, such as hospitality. This is especially crucial now as we continue to recover from the pandemic.
Hon. Members were given quite detailed information about their own constituencies to help them during the pandemic, and I was surprised to find that there are 3,000 people employed in the hospitality sector in Loughborough alone. That equates to exactly the same number as my biggest employer, so that was quite a surprise and very interesting.
It is good to hear support for the Bill in this House. I will take some time to address some of the points hon. Members have raised today, but first I will speak a bit more about why the Government are supporting it. Many were appalled to hear the stories a few years ago of bosses wrongfully pocketing tips intended for their workers—money left by customers who wanted to recognise the hard work and excellent service they had received from the staff.
That is why my Department took action to understand the scale of the problem. We launched a consultation to determine whether previous voluntary guidance in this area was sufficient. We have continued to develop policy positions based on evidence and conversations with stakeholders. The Government believe that tips should go to the workers who earn them and that businesses that withhold tips from staff are wrongfully benefiting from money intended for hard-working staff. While many businesses already pass tips on to staff in full, our evidence shows that nefarious practices persist, with businesses deducting up to 10% in some cases.
Some people have raised concerns with us that bad practice has increased since the pandemic. The Government are therefore pleased to support the changes in the Bill, and I will reiterate some of the key details about what the new rules will and will not do. As my hon. Friend mentioned, upon passage of the Bill the rules will prevent employers from making any deductions when distributing tips, apart from those required or permitted by existing legislation such as tax law.
We are not making any changes to tax law under the new rules. How tips are treated for purposes of taxes and national insurance contributions depends on whether they are made in cash or by card and whether they are made directly to the worker or processed by the business or by independent tronc. That will remain the case.
Under this Bill, anyone who is a worker will benefit from new rights, but it does not cover those who are self-employed. The rules will apply across all sectors, and that is the right thing to do. However, to be clear, businesses that do not normally deal with tips will not be significantly affected by the Bill. This is also a good opportunity to remind the House that tips already cannot be used to count towards national minimum wage pay. That has been the case since 2009.
Chris Stephens (Glasgow South West) (SNP)
I am grateful to the Minister for re-emphasising that point. Will she confirm that it is still the Government’s intention to pursue rigorously employers who are still trying to make tips part of the national minimum wage and that those companies should be named and shamed, as is currently the case?
Jane Hunt
I thank the hon. Gentleman for his question, and I can tell him that, yes, that is absolutely the case.
I will now talk about the proposed code. A voluntary code of practice on this topic was published in 2009. Our evidence shows that voluntary guidance alone has not been enough to stamp out bad practice. This Bill will therefore require employers to have regard to a statutory code of practice. The code will continue to be developed in partnership with key stakeholders, and will be subject to a full consultation period before the final version is brought to the House for approval. The code will outline a fair and transparent allocation of tips, as set out in different example scenarios. It is very important that the code continues to be developed with stakeholder input, so that we do not inadvertently disallow certain arrangements that are considered fair in some workplaces for the benefit of both businesses and workers. It is important that the code can be updated in the future with the approval of Parliament but without any primary legislation, in order to keep up with changing practices.
I will now address some of the specific points made by colleagues in the debate. I thank my hon. Friend the Member for Watford again for all he has done. He raised a matter where I almost have to declare an interest, in that my husband interrogates the waiters whenever we go out to make sure that they are going to get the tip—it is surprising how many say that they will not get it. My hon. Friend the Member for Kensington (Felicity Buchan) clearly showed a good understanding of her local businesses and her constituency. She talked about burgers, and I quite agree that it is the service we pay for in the tip, not the burger itself. As she said, each establishment will create its own fair system available to everyone working there, so that the kitchen staff and cleaners can be included. They can decide what they want to do and that will then be followed. She also referred to consumers, and the Bill is fair to them as well. They are within my brief too, so I would like to be fair to them. I commend her for what she did while working in the Department for Business, Energy and Industrial Strategy until recently.
My hon. Friend the Member for Broxtowe (Darren Henry) talked about his experience and examples from restaurants in Broxtowe, and I can speak from experience when I say that the restaurants there are very good indeed. My hon. Friend the Member for Hartlepool (Jill Mortimer) talked about the great variety of restaurants on the Hartlepool riviera, which provide such great service to the people of Hartlepool—again, she is to be commended. My hon. Friend the Member for Charnwood (Edward Argar) talked about statutory protections that are currently lacking in the system and about rewarding the service given. He referred to the need to be timely and fair, and the word “fair” comes through again and again in this Bill. He is absolutely spot on.
I thank my hon. Friend the Member for Meriden (Saqib Bhatti) for his kind words and I thoroughly enjoyed working with him on the all-party group for small and micro businesses. He talked about a shortage of workers because of the pandemic, and indeed previous to that. I hope that this Bill will attract workers to the sector and help it to become one where people can form a career and get on in life. I am happy to meet him to discuss the hospitality sector, as he requested.
The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy), referred to her surprise about some of the well-known businesses that have been taking tips. I absolutely agreed with her on that, as I was surprised as well. Conservatives always support hard work, and I think that is the vein in which we have been talking more than anything else.
The hon. Member for West Ham (Ms Brown), and my hon. Friends the Members for Watford, for Cheadle (Mary Robinson) and for Meriden raised concerns about employers using tips to top up low-paid workers. The law is clear: tips, gratuities and service charges cannot count towards the minimum wage. The Bill does not alter that position, and under these proposals employers cannot use tips to make up national minimum wage pay. My hon. Friend the Member for Meriden rightly said that we need more workers to get the pay and tips they have earned, to help promote employment in the sector, as I mentioned. Actually, there is no need to wait for this Bill to be passed; the sector should put its plans in place well in advance.
My hon. Friend the Member for Watford referred to deductions from tips for card payments and admin fees. To be clear, under this policy, employers must pass on all tips to workers without any deductions, other than those required or permitted by existing legislation—for example, normal tax rules will apply. They cannot make any deductions to cover the costs of running a business, including the cost of processing card transactions or other administrative costs.
My hon. Friends the Members for Watford and for Meriden referred to clarity around the code of practice. As I mentioned, the statutory code of practice will be published and consulted on before being laid before both Houses of Parliament for approval. The code will be developed through consultation in partnership with stakeholders. We hope to start informal discussions on the draft code later this year. There will be more formal consultation on a draft after the Bill has received Royal Assent. The code will provide details on when the Bill applies, how many employers should distribute tips fairly, tronc arrangements, employers’ tipping policies and record keeping. It will also include illustrative scenarios, such as sharing out tips between front of house staff and kitchen staff.
In conclusion, bringing forward these new rules will protect more than 2 million workers from bosses who do not currently do the right thing, and give them an avenue for seeking remedies. Businesses will be assured that they are not being undercut by companies where bosses are keeping tips for themselves, and consumers will have increased confidence that their tips are going to the workers they intended them for. The new rules are backed by previous Government evidence and analysis. The Government are therefore pleased to support this private Member’s Bill.
Chris Stephens
I thank the Minister and I congratulate the hon. Member for Watford (Dean Russell) on bringing forward this important Bill. I make a similar plea to hon. Members about the previous Bill: will she discuss with the Leader of the House how we can get the legislation through quickly? I would like to take part in Committee if possible.
Jane Hunt
Yes, of course I will ask about that. There are reasons, related to HMRC and that kind of thing, why it might still be delayed, but I will do exactly as the hon. Gentleman requests.
It is good to see the support for the Bill in the House today. If we take away—takeaway is the operative word, given what we are talking about—one thing, it is fairness. I look forward to continuing to work with the Member in charge of the Bill, my hon. Friend the Member for Watford, who is a dear friend and works tirelessly for the people of Watford, and with stakeholders to support the passage of the measures.
Dean Russell
With the leave of the House, I thank all hon. Members for their contributions. We heard from my hon. Friend the Member for Kensington (Felicity Buchan), an intervention from the hon. Member for Neath (Christina Rees), and from my hon. Friend the Member for Meriden (Saqib Bhatti)—I did not realise I was one of the great west midlands exports, but that is wonderful to know. We also heard from my hon. Friends the Members for Broxtowe (Darren Henry) and for Hartlepool (Jill Mortimer)—I will endeavour to attend the Riviera as soon as I can.
I particularly liked the speech from my hon. Friend the Member for Charnwood (Edward Argar). In his previous role, in which he was always fantastic, I would normally be lobbying him about my hospital, so it is wonderful to hear him talking about hospitality instead—slightly different. We also heard from the shadow Minister, the hon. Member for Bristol East (Kerry McCarthy), and the hon. Member for Glasgow South West (Chris Stephens). I give my heartfelt thanks to the Minister, at the end of her incredibly successful first week in the role, for signalling the Government’s support for the Bill. To know that we will hopefully change the lives of many millions of people across the UK is incredible.
I hope that hon. Members on both sides of the House agree that this is an important piece of legislation to ensure fairness and transparency for workers and employers. I am hugely grateful to everyone who has campaigned and fought for tips to be fairly given to workers for such a long time; it is wonderful to know that I am standing on the shoulders of giants. The Bill represents a great opportunity to tackle the rising cost of living, to increase consumer confidence and to help ensure that hard-working individuals get the money they have been given and deserve. I hope this Bill will go through the House with full support, and when giving a tip as a thank you at the end of meal I look forward to not having to say, “Will you get all of this?” Hopefully that day will come in the next few months. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).
Employment (Allocation of Tips) Bill
Wednesday 12th October 2022
(2 years, 1 month ago)
Public Bill CommitteesRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text Read Debate Ministerial Extracts
The Chair
I begin with some instructions that are contrary to the Government’s view that you should not tell people how to live their lives. Please switch electronic devices to silent. No food or drink, except for the water provided, is permitted during sittings of this Committee. Hansard colleagues would be grateful if Members emailed their speaking notes to hansardnotes@parliament.uk. My selection and grouping for today’s sitting is available online and in the room. No amendments have been tabled. We will have a single debate on all the clauses in the Bill.
Clause 1
Tips, gratuities and service charges
Question proposed, That the clause stand part of the Bill.
Virginia Crosbie (Ynys Môn) (Con)
It is an absolute pleasure to serve under your chairmanship, Ms McDonagh, and to bring this Bill to Committee. I express my sincere thanks to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford, and congratulate him on becoming a Minister. It was he who first tabled this important private Member’s Bill and did so much work to get it to this stage. This groundbreaking legislation will benefit millions of workers, and I am honoured that the Minister has asked me to sponsor this Bill with Government and cross-party support.
The Bill is all about fairness. I entered politics to be a voice for others. The hourly pay in the hospitality sector is one of the lowest of all sectors in the UK. The Bill will potentially benefit more than 2 million people— 7% of workers in the UK—who receive tips as part of their work.
Mark Eastwood (Dewsbury) (Con)
My son, Liam Eastwood, works in the hospitality industry. He is quite fortunate that he keeps all his tips, which supplement the quite decent wage that he is paid as well. Does my hon. Friend agree with me that, contrary to what some on the left are saying, the Bill ensures fairness in allocating tips and is not an attempt to reduce a decent living wage?
Virginia Crosbie
My hon. Friend is a hard-working champion and advocate for his constituents in Dewsbury, and I have been hearing about his son, Liam, and how he has been working. I highlight the fact that the Bill has so much cross-party support. It is great to see how we are all working together to make a significant change for workers in the hospitality sector, who are having a particularly tough time at the moment.
As I said, the Bill will potentially benefit more than 2 million people—7% of workers in the UK—who receive tips as part of their work. It will ensure fairness across the board, so that whether people work in Pete’s Burger Bar in Holyhead or serve fine dining at the Gaerwen Arms, they will be treated fairly and equitably. Places in dire need of levelling up, such as my constituency of Ynys Môn and other coastal and rural communities, are often home to thousands of people employed in tourism and hospitality. Local employers on Anglesey include the Sandy Mount hotel, Sergio’s, the Sea Shanty, Catch 22, the Oyster Catcher, Dylan’s, and the White Eagle. There are so many to mention—I am sure all Members here have the same story to tell.
I was the first one in my family to stay on at school beyond the age of 16, and it was the hospitality sector—work in restaurants, pubs and cafés, like the Mercury Café and Fifi’s Restaurant—that helped me to pay my way through sixth form and university. The tips I earned were spent on a new winter coat or a pair of warm boots.
There is a drive for better hospitality career opportunities and pay—driven by the likes of Aled Jones-Griffith and his team at Coleg Menai—but jobs in such sectors are often seasonal and poorly paid. For many workers, tips form an important part of their potential earnings, particularly in these challenging times. Although most employers distribute tips fairly and honestly, that is not the case for everyone. That is what the Bill seeks to address.
I will deal with clauses 1 to 14 together. The provisions create a legal obligation on employers to pass on tips to workers in full. The only deductions permitted are those required or permitted under other statutory provisions, such as tax law. That will promote fairness for workers and ensure that they receive the tips they earn. The vast majority of customers give tips on the assumption that they will go to the workers, and do not expect businesses to take a slice. Likewise, workers rightly expect to receive their tips in full, in recognition of their hard work.
The Bill will also provide greater transparency for employers and workers on how tips should be treated, and will create a level playing field for businesses that already pass on tips to workers in a fair and transparent way. Finally, consumers will have the confidence that the full value of their tips will go to workers.
Let me set out the detail of the clauses. Clause 1 inserts into the Employment Rights Act 1996 a new part on how employers must deal with qualifying tips, gratuities and service charges, which I will refer to as tips. The Bill will apply to all tips paid by a customer to an employer, including tips paid by card, which are usually paid into the employer’s bank account. Some 80% of tipping is now paid by card.
The Bill will also apply to tips paid directly to a worker if the employer controls or influences the allocation of tips—for example, if the employer tells workers how to share the tips between themselves. The Bill will not apply to tips received by workers when an employer or associated person does not control or significantly influence the allocation of the tip.
Clause 1 aims to capture all scenarios in which an employer has control over tip allocation and distribution, to prevent them from taking advantage of that control to exploit workers. The clause provides that
“tip, gratuity or service charge”
means the actual amount paid by the customer. As employers cannot make deductions for things such as processing fees, the Bill ensures that workers receive the full amount of tips.
Clause 2 introduces a fairness requirement that requires employers to ensure that the total amount of tips is allocated fairly among workers of the employer at the place of business where the tips were paid. That means, for example, that tips paid by customers at a particular restaurant will not be shared with workers at a different restaurant of the same employer. In determining how to allocate tips fairly, the employer must have regard to the relevant provisions of the code of practice, which is described in later clauses. The amount of tips allocated to a worker is payable to the worker by the employer.
Clause 3 sets out how the employer’s obligations apply when tips are allocated by an independent tronc. The Bill allows for tips to be allocated by an independent tronc as long as the arrangements are fair overall and have regard to the code of practice. The word “tronc” comes from the French word for an alms box; it is about pooling and redistributing tips. The tronc can be employer controlled or independently operated by a member of staff or a payroll or accounting company. Tipping practices vary among employers, and the Bill seeks to support diverse practices as long as they are fair. Clause 3 also provides that tips can be payable to workers by independent tronc operators, either directly or through the employer’s payroll.
Clause 4 details when tips must be dealt with. It sets out that an employer must ensure that tips are allocated to workers and paid no later than the end of the month following the month in which they were paid by the customer. For example, if a tip was paid on 8 April, the employer would need to deal with the tip by 31 May.
Clause 5 sets out how an employer’s obligations regarding tips apply to agency workers, who are workers supplied by an agency to work for a business, such as a restaurant. They benefit from the Bill and will be treated as if they were workers directly employed by the restaurant. That ensures that agency workers do not miss out on tips they have earned. The clause defines which agency workers are eligible to be covered by the protections and requires tips to be fairly allocated to eligible agency workers. It allows a business to pay the agency worker’s share of the tips to the agency, which must then pay that sum to the agency worker. This is because agency workers are often not on the business’s payroll.
Clause 6 concerns the written policy and records that employers must keep of tips. All employers that deal with tips on more than an occasional or exceptional basis are required to have a written policy on dealing with tips. That policy must include whether or not the employer requires or encourages customers to pay tips and how the employer ensures that all tips are dealt with in accordance with this legislation, including in respect of how the employer allocates tips. The employer is required to make the written policy available to all workers of the employer at the place of business.
Employers are also required to keep records relating to tips. Records must be kept for three years and include the total amount of tips paid, the amount allocated to workers and, if relevant, the amount allocated to an independent tronc operator. The requirement to keep records is essential to ensure that workers have access to the information they may need to enforce their rights. The clause provides workers with a right to make a written request to access limited relevant parts of their employer’s tipping records. That allows workers to gather evidence to seek redress if they are not being treated fairly.
Clause 7 explains the enforcement mechanism for employers’ obligations regarding tips. Workers can present complaints to an employment tribunal that an employer has failed to comply with their obligation to allocate tips fairly, or failed to do so in time. The clause also allows agency workers to present complaints. The limitation period for those complaints is 12 months.
Workers’ rights to bring forward such claims are at the core of the Bill, as employment rights need to be underpinned by effective enforcement. The clause sets out how a tribunal should determine complaints about tips. When a complaint by a worker is well founded, the tribunal must make a declaration to that effect. The tribunal may also make a range of orders, including an order requiring the employer to revise any allocation of tips they have made, or an order requiring the employer to make a payment to a worker of up to £5,000 to compensate them for consequential financial loss.
Clause 8 explains how workers can complain if their employer breaches the information provisions. That includes an employer failing to comply with the requirements relating to written policies dealing with tips, records of how tips have been dealt with or workers’ written requests for information. Workers can bring forward a claim to an employment tribunal in those circumstances. The limitation period is three months. Workers’ rights to bring forward those claims are essential to the Bill, as access to that information allows employers to be held accountable and workers to check that what they are paid is correct and fair.
The clause sets out how a tribunal should determine complaints about the employer’s policy or record keeping obligations. When a complaint by a worker is well founded, the clause states that the tribunal must make a declaration to that effect. A tribunal can also order a payment from the employer to a worker of up to £5,000 to compensate them for consequential financial loss.
Clause 9 gives the Secretary of State powers to issue, revise or revoke a code of practice for the purpose of promoting fairness and transparency in the distribution of tips. The code of practice is necessary to help to describe different circumstances that are fair or unfair in more detail than the Bill could. The code can also be adapted to changing circumstances more easily than primary legislation. To issue a code of practice, the Secretary of State must consult ACAS and publish a draft to allow stakeholders to make representations, before laying the draft before both Houses of Parliament for approval.
The clause establishes the procedure to revise or revoke the code, and details the legal effect of the code. It sets out that the code is admissible as evidence in proceedings before an employment tribunal and, where relevant, must be taken into account.
Clause 10 sets out some additional provisions relating to tips. It prevents employers from bringing restitution claims against workers in respect of tips. If an employer is ordered to revise their allocation of tips and they have over-allocated tips to a worker, those tips are not repayable from the worker to the employer.
The clause preserves existing contractual arrangements relating to tips. That means that if a worker was already entitled by their contract to receive a certain percentage of qualifying tips, they would remain entitled to those tips despite the passage of the Bill. However, payments under the statutory and any contractual obligations can be set off against each other to avoid double counting.
The clause prevents workers from opting out of their rights under the Bill and provides further definitions, including of “customer” and “place of business”. It clarifies certain situations in which it is unclear to which place of business a tip is attributable. The clause also provides that the Bill applies to tips paid by customers on or after the date on which the obligation to allocate tips fairly comes into force. The Bill is not retrospective.
Clause 11 amends certain provisions of the Employment Rights Act 1996 with regard to tips and clarifies that a worker cannot contract out of, or consent to amend, their right to receive tips that have been allocated to them by their employer. It also amends the definition of “wages” to include tips.
Clause 12 amends other pieces of employment legislation as required. That is because some Acts require amendment to ensure the provisions will apply correctly and cohesively once the Bill comes into force.
Clause 13 sets out where the provisions of the Bill apply in the United Kingdom and provides that the Bill regulates qualifying tips paid at, or otherwise attributable to, a place of business located in England, Wales or Scotland. The legislation does not regulate tips in Northern Ireland because employment law is devolved to Northern Ireland.
Clause 14 is the final clause apart from the title. It defines how and when the Bill comes into force, and confers the power on the Secretary of State to determine when clauses 1 to 12 come into force by the making of regulations. Clauses 13 to 15 come into force on the day the Bill is passed.
Let me close by thanking the Chair, the officials who worked so hard to make the Bill a success and everyone present for supporting the Bill. Once again, I thank in particular my hon. Friend the Minister for putting his faith in me and for everything he has done to bring the Bill this far. We all want workers to be treated fairly, and we all want to see the rewards for hard work distributed to those they are meant for. This is a great opportunity for stakeholders to engage in setting up the code of practice. Let us work together to ensure the Bill achieves what it has set out to do.
David Linden (Glasgow East) (SNP)
It is a great pleasure, as ever, to serve under your chairmanship, Ms McDonagh. I congratulate the hon. Member for Ynys Môn on taking the Bill forward on behalf of the Minister, the hon. Member for Watford. I congratulate him in particular on rising to ministerial office; I have always found him incredibly thoughtful since he entered the House in 2019. I never quite thought it would be a Conservative Member bringing forward legislation to strengthen employment rights, so I am grateful to Comrade Russell for doing that. I only hope that the current Leader of the Opposition can bring himself to start supporting employment rights, because he seems to be on a bit of a slippery wicket on that one.
I want to offer my support and that of my party for the whole Bill, from clauses 1 to 15. My constituent, Joan Tomson from Carmyle, was in touch with me in the summer about this specific issue of how to protect tips for staff. I am fortunate to have in my own constituency excellent restaurants such as Kastriot’s in Baillieston and Gia’s of Shettleston. They would not dream for a minute of trying to steal their staff tips, but this Bill addresses the bad employers out there who behave in a completely unacceptable way. It is right that we bring forward legislation to bring them to heal.
It will come as no surprise to the Minister when I say that the Government need to bring forward a full employment Bill. It is noticeable that we are having to bring forward piecemeal bits of legislation, such as the excellent Bill before the Committee or, indeed, the legislation introduced by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) on neonatal leave and pay. These are hard-won battles that we are having to fight on employment rights, but if anything has been taught as a result of the shameful actions of British Airways and P&O Ferries—
Chris Stephens
Does my hon. Friend agree that this Bill and the other legislation that he talks about have the support of the trade union movement, which is playing a vital role? The rhetoric that we sometimes hear from Ministers is not the rhetoric that we want to hear. We want to see a partnership with trade unions so that we can shape employment legislation that deals with insecure work and unfair conditions.
David Linden
This is probably an appropriate juncture to declare my membership of the Unite trade union. I agree with my hon. Friend; he is right to put that on the record and it is topical because at the weekend the wonderful Rozanne Foyer from the Scottish Trades Union Congress talked at the SNP conference about how refreshing it was that the Scottish Government very much view trade unions as partners. I am sure that, given the doughty leadership of Comrade Russell as the Business Minister, the trade unions will find an open door from this Government, but my hon. Friend is right to put that on the record.
As much as I seek to poke a bit of fun at the Minister, today is a day for us to work across party lines. This is an excellent piece of cross-party legislation and I will be glad to see it hopefully pass through Committee, through the remaining stages in this House and then over to the noble Lords, and receive Royal Assent.
The Chair
I see no other Back Benchers wishing to contribute to the debate. Would Chris Stephens like to sum up on behalf of the SNP?
The Chair
Okay. I understand that the shadow Minister has a personal issue that means she is unable to be here this morning, so I call the Minister.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Dean Russell)
It is an absolute pleasure to serve under your guidance, Ms McDonagh.
As has been kindly noted, until recently I was the policy sponsor for this Bill; I am honoured to be the responsible Minister and to see it through the whole way. I thank my hon. Friend the Member for Ynys Môn for stepping in to sponsor the Bill, and I thank the other Committee members for their time and energy. Personally, it means a lot to me, and it will mean immense amounts to the millions of workers we will help by getting the Bill through Parliament. It will make a difference to them.
This is about fairness. The issue of protecting workers’ tips is not only close to my heart but incredibly important to so many. I am grateful that we have cross-party support, as indicated today and on Second Reading, to help to take the Bill forward.
Judith Cummins (Bradford South) (Lab)
I welcome the Minister to his place. Will he outline the broad support that the Bill has received not only from individual trade unions but, importantly, from the TUC?
Dean Russell
I thank the hon. Lady for her comments. It has been fantastic to engage with all those groups and I am immensely grateful to all those who have lobbied and pushed for this legislation. I will come to this point later in my speech, but the Government originally explored this issue in 2015, and the discussion goes back way longer than that. I am grateful to everyone who has been involved. I am not sure whether I am allowed to allude to myself as the hon. Member for Watford, but in his speech on Second Reading the hon. Member for Watford said that he felt very much that he was standing of the shoulders of giants, as I do, and we really are. This change has long been fought for and I am pleased that the Government listened to me when I was a Back Bencher. I am now very pleased to be the one listening and helping to make this change happen.
This change is happening because many people were appalled to hear the stories over the past few years of bosses wrongfully pocketing tips that were intended for workers. The money left by customers who wanted to recognise the hard work and excellent service of staff was taken by businesses; at times they took up to 10%, and we heard about the awful, nefarious practice of staff not receiving tips at all. The Bill will stop that practice. The Government believe that tips should go to the workers who earn them and that businesses that withhold tips from staff wrongfully benefit from money that is intended for hard-working staff.
Ultimately, the Bill will stop that conversation we have at the end of a meal or after having received good service—I think we have all said, “Are you definitely going to get this tip?” It is important that the Bill will end that conversation.
Ian Levy (Blyth Valley) (Con)
Does my hon. Friend agree that the Bill will encourage people who work in the hospitality industry to realise that they are actually going to get the tips for the service they give? In itself, that will encourage better service, because it will give people that feeling that they want to put more into the job.
Dean Russell
Absolutely. The Bill will give everyone certainty: in a time of particular uncertainty, especially as we face the cost of living crisis, people will know where they stand. Of course, it will take some time for the legislation fully to come into force, but organisations should put measures in place now rather than wait for the law to change. That is how it should have been anyway, but the Bill will make sure that businesses with bad practices deliver the right thing in the short term and onwards.
Mary Robinson (Cheadle) (Con)
I was pleased to be in the Chamber to support my hon. Friend when he was the promoter of this much-needed Bill, so it is great to see him in his place to take it even further. First, how will we ensure that the 2 million people we are trying to help with the Bill get the message? Will the Government run a public relations campaign to ensure that those people know their rights? Secondly, some unscrupulous employers will not treat people in the right way, so it is good to see in the Bill clauses to protect people who could be affected. Of course, some people end up in employment tribunals because they have been sacked or unfairly dismissed because they have complained about a process, so will the Minister, in his new position, also advocate for whistleblowers, to ensure that they too get the right protections in law?
Dean Russell
I know how important my hon. Friend’s campaigning on whistleblowing is for her and I appreciate her raising it. I will come to the tribunal process later in my speech. In terms of communications, it has been wonderful that, from the early stages of the Bill, the media have been very active in promoting it, and I know that the Government have been very much promoting it. This is also about transparency, which I will come to, in terms of not only ensuring that businesses are clear with their staff but making it clear to the public that members of staff will be keeping 100% of their tips. That is a key part of the Bill that it is so important to get across: 100% of their tips—everything that they are given—should be shared fairly with staff.
I will continue with my speech, so that we can come to a close. All the points that have been made show why the Government stand resolutely behind the Bill. We want to see it enacted, benefiting millions of workers in industries where tipping is common, such as hospitality, which is such a huge workplace for so many. My hon. Friend the Member for Ynys Môn has set out how the clauses protect workers and why that is so important, and I am pleased to say that the Government support all the clauses. I will reiterate a few points on why they should stand part of the Bill.
The Bill will prevent employers from making any deductions when distributing tips, apart from those required or permitted by existing legislation, such as under tax law. That ensures that all money left by customers is passed to workers in full—I reiterate the words “in full” as often as I can. The Bill also establishes a requirement to allocate tips fairly—fairness is at the heart of the Bill—between workers at a place of business. That protects vulnerable workers and prevents exploitation.
A statutory code of practice will help to promote fair allocation of tips. The code will be developed with the help of key stakeholders and will be subject to a full consultation period before the final version is brought to both Houses for approval. On the point that my hon. Friend the Member for Cheadle made, that consultation is key, because it will help to raise awareness of what organisations and workers want but also make them aware that this is going to happen across all the sectors affected. It will ensure that the diverse views and practices of stakeholders are taken into account in preparing the code. To support enforcement of these new requirements and hold employers to account, the Bill will also require employers to have a written policy on tips and to maintain records relating to tips. These measures will be enforced by employment tribunals, with the tribunal empowered to revise allocations of tips and order compensation of workers.
The hon. Member for Glasgow East, who is not in his place, made some wonderful comments, and I reiterate my thanks to him for them. He asked why this legislation is not being brought forward as part of an employment Bill and is, instead, a private Member’s Bill. The Bill highlights a very important issue, and I am pleased to say that there is cross-party consensus that tips should be fairly attributed to workers. I know, because I felt it at the time, that it was disappointing that the Queen’s Speech did not include an employment Bill for the third Session of this Parliament, but we remain committed to bringing forward legislation to deliver on our commitments on employment rights, and I know that there are several other pieces of legislation coming through.
Chris Stephens
I am grateful to the Minister, who is, as always, generous in taking interventions. A number of Members have stepped in where the Government have not acted—a number of private Members’ Bills are being tabled that address issues of employment and workers’ rights. Will the Minister commit to look at those pieces of legislation and meet the hon. Members who have put them forward, so that we can tackle some of the issues and injustices that take place at work?
Dean Russell
I thank the hon. Member for his comments. I am always happy to meet Members and discuss how they feel we can create better workplaces and support workers’ rights. I already have many meetings with colleagues to ensure that we are heading in the right direction on that.
With regard to the comments made by the hon. Member for Glasgow East, I want to be clear that more needs to be done to ensure that tips earned by workers go to them in full, which is why the Government are supporting the Bill. I am incredibly grateful to my hon. Friend the Member for Ynys Môn for taking forward this legislation.
I also note the comments made by my hon. Friend the Member for Dewsbury about his son, Liam. I know he is a proud father of Liam; he regularly talks about how proud he is of him. Liam is a credit to him, with the work he is doing while at university. The key point my hon. Friend made is that this is not about topping up salaries. That is an important point in the Bill, and it is important that we communicate it. This is a gratuity, tip or service charge that is a “thank you” on top of a salary. It should never be used by employers, and the Bill makes it clear that this is not about topping up salaries; it is about an additional piece and making sure that workers receive tips fairly and squarely.
I will now conclude, because we have covered a lot of ground and I am very pleased with the feedback from the Committee. The Bill provides vital protection for low-paid workers. Bringing forward these new rules will protect over 2 million workers from bad bosses and give them an avenue to seek remedies. It will be good for businesses too, as they will be confident that they are not being undercut by companies where bosses are keeping tips for themselves. The Bill is an excellent step. My hon. Friend the Member for Ynys Môn has received support from both sides in the House and in Committee, and I want to thank everyone for the collaborative way we have all worked, for the way that the feedback has come in and for their support inside and outside the Chamber to make sure that workers are protected in this way. I look forward to following the Bill through its parliamentary stages.
Virginia Crosbie
This House is at its best when people work together, and the Committee has been a shining example of that co-operation and collaboration. I thank all hon. Members who have been on this short Committee. As a Welsh MP, I am delighted that there are two other Welsh MPs, both of whom are women, on the Committee. Tourism is a key sector in Wales, contributing around 12% of all employment.
I thank those who contributed to the debate. My hon. Friend the Member for Dewsbury talked about his son Liam, who has had a very positive experience in the hospitality sector. The hon. Member for Glasgow East talked about a level playing field, and I congratulate him on his private Member’s Bill on neonatal care. The hon. Member for Glasgow South West talked about the support of the unions, and Kate Nicholls, who heads up UK Hospitality, has been very helpful with the Bill. My hon. Friend the Member for Blyth Valley talked about fairness, and my hon. Friend the Member for Cheadle talked about the importance of a PR campaign and whistleblowing.
This is an important Bill, which enshrines a right that seems evident to many consumers already, and I am sure hon. Members will agree that it is not right that business owners can keep part or all of the tips given in good faith to workers by customers who recognise the good service they have received.
Tonia Antoniazzi (Gower) (Lab)
This is a great Bill that will give the hospitality sector the boost that it needs and provide people with security in their job. Does the hon. Lady agree that this is really needed, particularly in parts of Gower and her constituency of Ynys Môn, where we have such a shortage in hospitality?
Virginia Crosbie
I absolutely agree with the hon. Lady. This Bill is so important, and it is important that we can get these people back into the sector. Tourism and hospitality is one of the key sectors across the UK, but particularly in Wales.
Fay Jones (Brecon and Radnorshire) (Con)
I congratulate my hon. Friend on the progress of the Bill. As she mentioned, there are three female Members of Parliament from Wales on this Bill Committee. Hospitality is a sector that employs more women than average, so does she agree that the Bill is a very good step towards getting more women into the workplace?
Virginia Crosbie
I absolutely agree with my hon. Friend, and she makes an important point. The average salary in the sector is one of the lowest in all sectors in the UK, and the sector is particularly important for women.
I would like to highlight the fact that, although we have three Welsh MPs, we also have two MPs from Yorkshire—I do not want them to feel left out. I am grateful for everyone’s support so far, and I particularly thank the Minister. I hope we can use this momentum to deliver the successful passage of the Bill and benefit workers right across the UK.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 15 ordered to stand part of the Bill.
Bill to be reported, without amendment.
Employment (Allocation of Tips) Bill
Friday 20th January 2023
(1 year, 10 months ago)
Commons ChamberRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Virginia Crosbie (Ynys Môn) (Con)
I beg to move, That the Bill be now read a Third time.
I am glad that we have time to debate this important Bill. It has a simple message: to promote fairness and transparency to ensure that workers receive the tips that they earn. It will create a level playing field for businesses that are already passing on tips to workers fairly and transparently. It will create confidence for consumers, who will know that the full value of the tips that they give will go to the workers. I thank the Minister and the Government for supporting the Bill and I am delighted that it has Government and cross-party support on Third Reading.
I also thank the hon. Member for Watford (Dean Russell) for his work on the Bill; he has been instrumental in bringing this important legislation to the fore. The Bill would not be where it is today without his determination and hard work. When he asked whether I would take the Bill over from him, I was honoured. I have experienced first hand the importance of tips and, like many young people, I financed my sixth form and university studies by working in cafés and pubs.
My constituency is dependent on the hospitality and tourism sector, which is also one of the largest sectors in Wales. At a particularly difficult time, this is an opportunity to help and support those who work in the tourism and hospitality sector, which has one of the lowest hourly rates of pay. It is estimated that the Bill will benefit about 1 million workers in the sector with a financial benefit of about £200 a year. With the cost of living at the front of many people’s minds, the Bill will help those workers who are wrongly not receiving the money that they are due from the tips that they have earned. In sectors such as hospitality and beauty services, customers recognise and reward good service and hard work through tips, gratuities and service charges, which I will refer to collectively as tips.
The customer expects 100% of the tips that they leave to go to the workers. We already know that that is happening in most businesses, where tips are passed on to staff in full, but some unscrupulous employers exploit staff by retaining some or even all of the tips that workers earn. That goes against the assumption of the large majority of customers that 100% of the tips that they give will end up in the pockets of the workers.
David Johnston (Wantage) (Con)
My hon. Friend is absolutely right: customers expect 100% of tips to go to staff. Does she agree that people who work in hospitality will also make the assumption that any tips they get will be theirs, and that their wage, which may not be very high, will at least be supplemented by what they earn for their service?
Virginia Crosbie
My hon. Friend makes a very good point. People—particularly young people—who are looking for employment in the hospitality sector will look at it as a whole package when considering what it means for them and whether they will be able to earn enough. Tips are a vital part of their calculation when they are looking at taking such roles.
Workers expect the tips that have been given in recognition of their hard work and good customer service to be given to them in full. The Bill promotes fairness for workers by creating a legal obligation to pass on tips to workers, in full, with no deductions other than in very limited circumstances such as those required under law. It will provide protection across all sectors, but focuses on changing employment law to bring increased protection for workers in industries in which tipping is common. An additional benefit of this legislation is the increased confidence that consumers will have that the tips they choose to leave in recognition of good service will actually go to the workers for whom they are intended, and are not unfairly pocketed by bosses.
In determining how to allocate tips fairly, the employer must have regard to the relevant provisions of the upcoming statutory code of practice, which will set out principles of fairness and transparency relating to tips. That code of practice is necessary to describe—in more detail than a Bill can—the different circumstances that are likely to be “fair” and “unfair”. A number of examples will be provided to illustrate what fair tipping practices look like. Those examples are not included in the Bill, as that could limit flexibility for employers. To issue a code of practice, the Secretary of State must consult the Advisory, Conciliation and Arbitration Service, and publish a draft to allow stakeholders to make representations, before laying the draft before both Houses of Parliament for approval. The code of practice will be statutory and have legal effect, meaning that it can be introduced as evidence to employment tribunals considering whether an employer is in breach of the legislation.
There is one main theme running through the core of the Bill: the creation of a legal obligation on employers to pass on tips in full to workers. Giving workers 100% of tips means that there can be no deductions from tips by an employer other than in the limited circumstances required or permitted by other law, including tax law. Prohibited deductions include, but are not limited to, card transaction fees and administration costs. Some employers may use a tronc system to help with distributing tips. Under that system, which is mostly used in the hospitality sector, an employer delegates the collection, allocation and distribution of tips to a person or persons known as “troncmaster” or “tronc operator”. It is important that we retain flexibility for employers to choose how to distribute tips, as long as that distribution is fair.
Transparency is a crucial part of the Bill, and information plays a significant role. However the tips are allocated, the Bill provides workers with a new right to make a written request to access the relevant parts of their employer’s tipping records. That allows workers to seek redress if they are not being treated fairly by gathering evidence and bringing a claim to an employment tribunal where necessary. The Bill will be enforced by workers through the employment tribunal system, and provides employment tribunals with remedies for situations in which an employer has made deductions from tips or has not allocated tips in a fair and transparent way. Workers will be able to present to an employment tribunal complaints about an employer failing to comply with its obligations to allocate tips fairly or failing to do so in time. The Bill also allows agency workers to present complaints. The limitation period for such complaints is 12 months.
Workers’ rights to bring forward such claims are at the core of the Bill because employment rights need to be underpinned by effective enforcement. The tribunal can make a range of orders, including orders requiring the employers to revise any allocation of tips that they have made or to make a payment to a worker of up to £5,000 in compensation for consequential financial loss. That will help those workers who have not been fairly treated when tips have been distributed.
The Bill will have a limited impact on employers who already handle tips fairly and transparently. It is not expected that there will be significant change or cost to business in complying with the new rules. Employers will still have flexibility on how to design their tipping policies, how to maintain records, and how they communicate their policies to workers. In addition, when workers request information, employers will have a period of four weeks to fulfil that request.
I will conclude by giving a final overview of the Bill. It sets out the right that tips should go to the workers who earn them, and that those tips should be distributed both fairly and with transparency.
Mary Robinson (Cheadle) (Con)
I am grateful to my hon. Friend for giving way as she nears the end of her speech. She has made a very powerful case on behalf of workers who have been missing out on their tips up until now. I am keen for people to know about this Bill—workers, and also people like us who will go into a restaurant or a place to eat or to have a drink and ask, “Will you keep the tips?” Those people need to know for sure that the worker will be able to keep the tip, so a media campaign to support the Bill would be really helpful.
Virginia Crosbie
My hon. Friend makes a fantastic suggestion: it is incumbent on all of us and the sector to communicate the existence of the Bill. We have the likes of Kate Nicholls at UKHospitality supporting us, and the support of the unions; so many people are right behind the Bill, supporting those workers who play a vital role in such an important sector, so we will be seeing it communicated. As my hon. Friend the Member for Watford has previously stated, these Friday sittings are very special, and it is important that people know that in this House there has been an opportunity for us to put in place legislation that stands up for the rights of the workers.
As we are all aware, the process of taking a private Member’s Bill through the House is a fragile one, and I am thankful to all Members for working together to make sure that this Bill reaches its final reading in this House before progressing to the Lords. I take this opportunity to thank the Government again for supporting the Bill, especially Ministers at the Department for Business, Energy and Industrial Strategy, and I am grateful for the support of Members of this House while it has been moving through its stages—Second Reading, Committee, and now finally Third Reading. I firmly believe that the Bill gives us all a great opportunity to bring about real change, which will have an impact on workers who receive tips across all of our constituencies.
Matt Rodda (Reading East) (Lab)
I commend the hon. Member for Ynys Môn (Virginia Crosbie)—I hope I have pronounced her constituency correctly—for her work on this very important issue, which affects hundreds of thousands of young people and many people on low incomes across the country. We appreciate her work, and I also pay tribute to the hon. Member for Watford (Dean Russell) and other Members from across the House, and indeed to the GMB for its excellent work on this issue. It has been campaigning on this matter for many, many years—possibly for 10, 15 or 20 years.
Briefly, I will point out how important this issue is for my own constituents in Reading and Woodley. Any large town has a huge number of pubs, bars and cafes, and the volume of tips is quite considerable. It is very important that people working in those establishments are able to benefit from those tips, and it was fascinating and very important to hear the point made earlier that the average benefit to workers on relatively modest incomes around the country is £200 a year. Given the current cost of living crisis, that is clearly a very valuable contribution to somebody’s income, even if it is spread out over a long period of time. I am aware that some people in hospitality and similar sectors are among those who may have to resort to food banks to support themselves, so I hope the Bill will make a significant difference to those people’s incomes over the coming year.
Finally, I once again thank the hon. Member for Ynys Môn for her work. I can clearly see that in areas with a large hospitality industry, such as coastal or tourist areas, this is a particularly important matter; I would add that it also matters a lot in towns with major shopping centres or university towns, such as Reading. It is important to us as well, and I thank the hon. Member and others from across the House for their work.
Dean Russell (Watford) (Con)
I stand here today as a very happy man, but not without a certain trepidation, as I know the fragility of the private Members’ Bills process—even at this stage.
I begin by thanking the current Minister, the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), and those who came before me in my short period in the role, for making sure that the Bill is in front of us today and has Government support. I particularly thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie) for her work. To reuse a phrase slightly incorrectly—but I think it is true in this case—she took the Bill by the horns and made sure that we took it forward in such a way that it got here today. The truth is that, when I was made a Minister and was looking for somebody to take over this private Member’s Bill, I could not think of a better person in the UK, or potentially the world, to get behind it. I know how important hospitality is to her constituents and constituency. The power that she has used to get the Bill to this stage is incredible. As well as being an ambassador for the Bill, she has championed it to an extent that many would not have been able to achieve.
I will speak briefly about the purpose of the Bill and how it came about, because we need to recognise its importance. For many years, many of us have given tips in restaurants and similar, and as we hand over the money, put money in the tip jar or pay on a credit card machine, we often end the conversation by asking: “Are you sure you’re going to get this? Will you and your team get this tip? That has become part of the national conversation whenever giving a tip. There is a lack of surety about whether the tip will reach the people who have been serving or cooking. This Bill will help put an end to that question. We will no longer need to ask it, and members of staff will no longer need to worry whether they will receive the tip.
The birth of this Bill was mentioned in the excellent previous speech. The measure is not something that I came up with; it has been gestating in government and society for many years. Last May, Quentin Letts wrote a typically humorous and well-written piece about how snollygosters in the machine often slow down good Government policy and stop really positive Bills going through, whereas other laws, including those to raise taxes—that is not a dig at anyone—go through much more quickly. This Bill has been in the system for many years. As a result of the private Members’ Bills process, the work of Government and standing on the shoulders of giants, we are showing that when the right thing needs to be done, it does get done eventually.
The Bill’s power lies in the fact that it provides surety. It will result in 100% of the tip going to the workers. The next issue is how it is then divided. After this Bill is enacted and the code of practice becomes law and the tribunal process is introduced, work will be undertaken to provide organisations with a bunch of scenarios that they can refer to in order to ensure that the tips are shared fairly. The word “fairness” is at the heart of the 100%. This is about fairness. This is about the money going to the right people—the people we have given it to—and it is about them knowing that they are getting it and that there is no room for manoeuvre. It is as simple as that—100%—and fairness is absolutely key.
This is not about topping up salaries. The Bill is very clear—this was part of the work in the early stages with the fantastic civil servants—that this is not about saying that organisations can suddenly reduce the minimum wage and use tips to top up people’s salaries. A tip is a gratuity; it is a thank you, an addition. This is not about giving organisations the opportunity to treat is as part of a salary. I totally appreciate that, for many who go into the hospitality sector, the tip is part of what they see as income, but it should never be used to replace a salary or to top it up. It should be a thank you, an addition and a bonus to help those who work in the sector.
I am passionate about this private Member’s Bill, although it was my second attempt at promoting it. In Watford we have some fantastic hospitality organisations. We have new businesses such as The Beech House, along with older establishments such as Tarboush, L’Artista, the Essex Arms, Rhubarb Cafe and many others that I could list, but they all have a common thread. They all rely on people to come and work in those places—to work in hospitality, to wait on tables and to cook—and they also rely on customers knowing that they are going to have a fantastic experience and be grateful enough to want to give a tip at the end.
What I found during the pandemic was fascinating. We noticed that none of the places we went to, in my role as an MP and as someone who lives in Watford, was taking cash; or rather, most places were not. Increasingly, payment was by credit card. Again, the question was: what does that 12.5% service charge actually mean? Does it go to staff, or is it just for businesses to make a bit more money? In most places, most people we spoke to could not really give an answer. What is it actually for? Do we then give a tip on top of the credit card charge, or not? This Bill will make it absolutely clear. If it is a service charge, tip or gratuity, it will go to the staff.
I have heard people ask whether this change will create an extra burden for businesses—the word “burden” has been used a lot this week in debates on legislation affecting business. Actually, it will not be a burden for businesses. Most businesses do the right thing. Most businesses give the tips to their staff, and that is absolutely part of what they do, because many people in hospitality grew up working in the industry, will have had tips in the past and will therefore know how important it is for their staff to keep them. But there are a few businesses—including, sadly, from reports I have read, some large franchises—that do not make sure that their staff get those tips.
The vast majority of good businesses that pass on tips see this as a positive, not an extra burden, because they see that it creates a level playing field. Those businesses will know that other organisations cannot make extra profit out of the back pockets or wallets of the people who work for them. Not only is that utterly wrong, but it changes and games the system towards those engaged in bad practice versus those who do the right thing. Again, that is another important aspect of fairness in this Bill.
I will not talk for too long, even though I would love to talk for hours. There have been many ups and downs—at times I have felt my heart beating and thought, “Are we going to get this through? Is it going to actually happen?” I want to speak for as short a time as possible, to make sure we can hopefully pass the Bill on to the Lords, but I would like finally to make a point about workers’ rights. At the heart of this is workers’ rights and the young people in society, many of whom work in hospitality. But it is also about this place coming together. I always think that Friday debates are perhaps the most powerful, because we are all usually in some form of agreement, and the point-scoring party politics stays out of it. We have seen that with this Bill. As it has passed through this place, we have seen Members coming together, many of whom worked in hospitality when they were younger, have had experience of it, or have businesses in their own patch whose staff receive tips and gratuities.
If we can get the Bill through today—I urge all colleagues and the other place to please support it—it will make a difference to so many people. Not only will it make a difference to the million that have been quoted, to their friends and families, to the industry in its efforts to get more people to want to work or stay in it, and to businesses by ensuring that they are working on a level playing field; it will also show that, while it does sometimes take time to get legislation through this place, while it does sometimes get utterly frustrating and while, as Quentin Letts pointed out, it does sometimes look like the snollygosters might be winning, eventually one does get to the right place.
If we can get this through today, I will be really pleased, but so will society. I say thank you to the Ministers, thank you to the fantastic civil servants and a huge thank you to my hon. Friend the Member for Ynys Môn for the work that she has done.
Mary Robinson (Cheadle) (Con)
It is a pleasure to follow my hon. Friend the Member for Watford (Dean Russell), who has been such a pivotal architect of this Bill. I congratulate my hon. Friend the Member for Ynys Môn (Virginia Crosbie) on taking this Bill on and getting it to this stage, and on being such a powerful advocate for it and for the people who will benefit from it. I also wish to recognise the work of my hon. Friend the Member for Watford, who had originally introduced the Bill to the House; a lot of this work was done previously by him as well, and this really has been a great double act. I was pleased to support the Bill on Second Reading and through its Committee stage.
The Bill supports our Government’s commitment to ensuring fairness for workers by ensuring that tips are fairly distributed. Although many good employers ensure that staff receive their fair share of tips and are open about that sharing, we know that that is not always the case. As I have previously mentioned in the House, many constituents got in touch with me about this, reporting that they had as much as 15% of their tips removed from their pay packet. Often, they simply were not aware of how much was being taken away from their pay packet, because often customers leave a tip on a card. Whether customers leave a tip and how much they leave is determined in large part by the quality of service provided, and we want to be assured that these tips go to the person who provided that service. As has been said, this is not a part of their wage; it is an extra, a thank you, a recognition for the service. Many customers will not give a tip, or they will give a lower tip, if the service they get is not that great. People want to know that whatever they give goes to the person who has given them the service in the first place.
As has been mentioned, many people are concerned about how they go about leaving a tip; they wonder whether they should leave cash. When they have had a great meal or great service, is it better to give the person cash? We all rightly ask, “Will you get this in full?” Many people will just add the tip on to their card payment when the bill comes; this has become commonplace, and indeed I am astounded by how few people now carry cash around in their pockets. Many people are understandably distrustful whether a tip left by card will reach the intended employee in full. Indeed, my hon. Friend the Member for Watford noted on Second Reading that there is no guarantee that the person or team they gave it to will receive it. For employees, tips by card are less visible and they are difficult to track or claim.
That is the world we are in and so navigating it and making things work is part of our job. This Bill will put an end to these concerns, by amending the Employment Rights Act 1996 to place a legal obligation on employers to ensure not only that tips, gratuities and service charges are distributed to staff, but that that is done in full, without deductions, when these things are being distributed by the employer or via a tronc system. An interesting point was raised by my hon. Friend when he talked about the system by which these tips are distributed: what does that “12.5% service charge” really mean? Where is it going to go? Perhaps we should put into the minds of the hospitality industry the idea that they should set out whether they are running a tronc system and note, next to where the “12.5% service charge” is specified, “This will be distributed and given directly to the people who have provided the service to you today.”
As has been mentioned, we know that covid was a difficult time for the hospitality businesses, but many of them have bounced back well. Some in my constituency have even flourished. That is often in large part due to members of staff providing great service, combined with the loyalty of their customers. Tips help to show workers that their good service is valued and appreciated, and customers should be able to show this appreciation with confidence. Although we should not need a law that obliges employers to allocate all tips, gratuities and service charges without deductions, sadly it is very clear that we do.
We have not yet spoken in detail about the other areas where the Bill will apply, such as the beauty industry. This is often an overlooked area. We tend to talk about tips and tipping from the point of view of hospitality, restaurants, pubs and bars, but many people who work in nail bars and other venues are left tips. It is great to know that they will keep their tips, too. I encourage the Minister to back up the Bill with sound outreach for media coverage.
I welcome this Bill. I congratulate my hon. Friend the Member for Ynys Môn on moving Third Reading, as the Bill will make a welcome change. I hope and believe it will receive cross-party support.
David Johnston (Wantage) (Con)
Like many people, I was surprised to discover that tips are not being passed on. I think our understanding has always been that we pay the money on a restaurant menu for the food, and any additional money we leave is for the service. We have all given particularly generous tips for very good service, and I dare say we may have given a not so good tip, or maybe no tip, for particularly bad service, although never in our constituencies, obviously—there would never be bad service in my constituency, I hasten to add.
It sticks in the craw to think that a person may have worked so hard and received no benefit for that hard work, and that the tip would just be taken by the business owner. There are particular peak periods, such as Christmas, when the amount earned in tips can be a vital boost to a person’s income for that month, and maybe even for that year.
Simon Baynes (Clwyd South) (Con)
My hon. Friend is surprised that this is an issue. Has he or anyone he knows come across the difficult question of whether to tip by credit card or in cash? If the tip goes on the credit card, it is perhaps less likely to go to the employee. Has he given a great deal of thought to that issue?
David Johnston
I am grateful to my hon. Friend for his intervention. I was concerned that he was going to ask how much I leave in tips. Obviously, I am a very generous tipper.
Richard Fuller (North East Bedfordshire) (Con)
I am intrigued by my hon. Friend’s use of the word “generous.” In percentage terms, what does he consider to be a generous tip?
David Johnston
I am even more grateful to my hon. Friend for asking that question. I am probably not quite as generous as they are in the US, where a 25% or 30% tip is now sometimes recommended on the bill. I would always err on the side of giving a good tip, even for average service, and an even better tip for exceptional service.
Dean Russell
I have been asked, as I am sure my hon. Friend has, whether the Bill will move us towards the US model of tipping. As I said earlier, it is important to note that this is not about making tips part of the salary. We want workers to have good salaries, and the minimum wage has been increased again. Tips are a top-up. They are an additional gratuity to say “thank you,” rather than being part of the salary. That has come up a few times.
David Johnston
My hon. Friend makes a couple of important points. On his first point about the US, it was a particularly bad practice when employers were using tips to try to meet the minimum wage. We have made great strides in increasing the national living wage in recent years. I think it has now hit £10.40; the Minister can correct me if I am wrong, but I believe it is at least £10. That is particularly important. If we went into a restaurant and bought a pizza for £10, and the member of staff said when we paid, “I’m going to take £2 of that £10 for the pizza and keep it for myself,” there would be outrage. There would be outrage about the reverse situation, and it is right that we should feel offended on behalf of staff who are working hard for these tips and not getting them.
My hon. Friend the Member for Cheadle (Mary Robinson) is right: this is not just about hospitality. She made an important point about nail bars, hairdressers and lots of other places that I have many of in my constituency, but I realise that this is, in large part, about hospitality. My constituency has a lot of hospitality venues—pubs, for example. There are only seven MPs who have more pubs in their constituency than I do. I have been trying to get around them all, and I am doing pretty well.
The hospitality industry is vital for the UK economy, and particularly for younger workers, ethnic minority workers and part-time workers. It is a very accessible industry for people to get their foot on the ladder and get some important skills. It is hard work, often involving someone being on their feet all day, in difficult conditions, and dealing with difficult customers. It might involve long hours. It is vital, and it is hard. People get good skills, and they should get all their tips.
It is a small minority of employers who are doing this. Most employers will feel, as we do, that staff should be given the tips for the work they have done. That small minority of employers are shooting themselves in the foot in many ways, because where an employee has a choice between different employers—of course, they do not always—the chances are that they will pick the one that will let them keep their tips. That is a perfectly logical decision to make, and it is probably the decision I would make. As we discussed earlier, just as the customer expects a tip to go to the staff, the staff think, “That wage may not be very high, but I’ll be able to earn more in tips.”
This debate reminds me of two other things that are relevant to the passage of this legislation. The first is unpaid internships. The hope with this Bill was that employers would not wait for it to take effect but would start to change their practices before the statutory code came into effect, because the attention on this issue would make those practices socially unacceptable. I hope that that has happened. This reminds me of unpaid internships, which have unfortunately been rife in the UK. They have also been rife in this place, by the way. One reason why we were slow at first to make progress on getting rid of unpaid internships was that the two groups we often need for campaigns use them a lot: politicians and the media. Both are usually very important for campaigns on issues, and both were using a lot of unpaid internships.
When we look across our professions—media, fashion and many others—we find people working for no money. Their employers would say that they were providing a great opportunity, because people in those positions were getting skills that they would need later in the workplace, but the fact is that someone needs a number of things to let them do an unpaid internship. As internships are concentrated in London, interns usually need to move there and will need accommodation. While they are doing work for their employer, they will need money from somewhere, so they will either be working two jobs—one paid for and one not—or, as has often happened, be from the wealthiest families, who can support their children by supplementing those internships. Those internships then lead to jobs, and those jobs look unrepresentative of the country of a whole because of who gets into them.
Again, it is a small proportion of employers doing those things, but as we have shone a light on the issue with the Bill, making it clear that it is not acceptable for employers to be taking their staff’s tips, we would hope that employers have already started to change their practices. None the less, the Bill is important, and I am glad that it is being brought in.
The second issue that I am reminded of is access to cash, which, as Members have touched on, is currently a big challenge. We have banks closing branches all over the country, we have cashpoints disappearing, and we have an assumption that everybody wants to do everything by card or online. I get quite a number of constituents writing to me—I am sure that we all do—who are really concerned about that. They really like to be able to use cash, they worry that it will disappear and they do not know what they will do about it.
That is relevant to the Bill because we have heard the odd voice in the hospitality industry saying that the Bill is not a good thing because there are cost pressures on the hospitality industry at the moment and that, when people pay on card, the business incurs fees for those transactions, so it is not right to let all of the money go to the staff. Their basic argument is, “They might tip on card. I am paying money for that charge, and you’re saying that I have to give the entire thing to the staff.” I am hugely sympathetic to the hospitality industry in lots of ways, but I am afraid that I am not sympathetic to that particular point. However, it does relate to access to cash.
By the way, we could all do a better job of carrying cash. There is a national issue of how we ensure that people who need cash always have access to it. However, on the point made by my hon. Friend the Member for Watford (Dean Russell) about whether I need to have cash to ensure that somebody will get their tip, the answer, as a result of the Bill, is no, but, none the less, they might appreciate it.
I am afraid that I really do not agree with places that have become card-only. I accept that it may be simpler for some people to pay by card—particularly younger generations, although I do not want to make an age-related comment because I know of plenty of people in their 70s and 80s who like using contactless—but we could all do a better job of carrying cash so that tips could be paid and received in it.
One way or the other, this is a hugely important Bill. I congratulate my hon. Friend the Member for Ynys Môn (Virginia Crosbie) as well as my hon. Friend the Member for Watford on the work that he did before on the Bill. Although we are talking about a small minority, we are doing an important thing to ensure that people are rewarded for the effort that they put in.
Selaine Saxby (North Devon) (Con)
It is a pleasure to follow my hon. Friend the Member for Wantage (David Johnston), who made many important points. I pay thanks to my hon. Friends the Members for Ynys Môn (Virginia Crosbie) and for Watford (Dean Russell) for their Bill relay to get us to this point and for the work that has gone on behind the scenes. I welcome the Bill’s progress through the House.
Along with many others, I am disappointed by reports of companies keeping tips or portions of tips for themselves instead of passing them on to their staff as they should. I am confident that this will be a welcome piece of legislation for the 19% of people in North Devon employed by the hospitality sector.
North Devon is home to fantastic hospitality businesses. Each year, we welcome over 6 million visitors who come to enjoy our beautiful coastline and countryside. We love visitors coming to our area, and take pride in showing off our stunning scenery, beaches and delicious local produce. The hospitality sector is vital to our local economy, bringing in £560 million a year and supporting 11,100 local jobs—in fact, it is difficult to find a business that is not in some way reliant on tourism. The hospitality sector is key in enabling residents of North Devon to benefit financially from our visitors, and subsequently protect our world-class natural environment. Without functioning businesses, from our brilliant Brend Hotels to the Lynmouth Bay Café and the Glorious Oyster in Instow, as well as all the other fantastic hospitality businesses in North Devon that I do not have time to mention today, it would be unfeasible for our communities to continue protecting our natural world. The hospitality sector is working hard to ensure that North Devon remains a world-class destination.
Reliable staffing is key to a successful hospitality business, and the majority of businesses in the hospitality sector support their staff by distributing any tips appropriately. However, median hourly pay in hospitality is the lowest of all sectors in the UK. It is estimated that the average daily value of tips is £29 outside of London for a full-time worker, which adds up to roughly £6,500 a year. That pay is crucial to many, and in popular areas such as mine, it is a welcome addition for people facing higher house prices and rents as a result of North Devon’s popularity as a tourism destination, which is driving our current housing crisis. It is also unfair to other hospitality businesses, especially at a time of rising energy and food costs, that some unscrupulous operators are able to gain a competitive advantage by keeping a portion of tips or service charges for the business, rather than giving them to the staff, as customers clearly intended.
Given the rise of automatically added 12.5% service charges, the Bill brings welcome clarification that tips are for the staff, not the business. Tips are there to thank staff for their top-quality service; it is important that conscientious waiters, bartenders and chefs, and everyone who works to put delicious food and drinks in front of us, are recognised. Customers are quite rightly horrified at reports of businesses taking that money for themselves. The decline of cash has also made it easier for businesses to claim tip money as their own. As more people use cards for the majority of their transactions, tips are tied into the same receipt and have to be processed either at the till, or as part of regular accounts. Unlike with cash, cards take tips away from the staff on the floor and reduce transparency. Even this week, in what I had previously considered a reputable pizza chain near this House, a waiter asked for a cash tip.
As I have already said, hospitality is essential to our economy back home in North Devon, and unfortunately, many hospitality businesses are struggling to find staff. That has significant knock-on effects on the level of service businesses can provide and, ultimately, how much money they can make. Making jobs in hospitality more attractive is vital to my local businesses, and protecting workers’ rights to the tips left by customers will make the sector a more viable option. I welcome the Bill and the reassurance it gives to people working in the hospitality sector, and hope it will encourage more people to enter that vital sector. I once again thank my hon. Friends the Members for Watford and for Ynys Môn, and I am delighted to be supporting this Bill today.
Paul Howell (Sedgefield) (Con)
I thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie) for tabling the Bill, and my hon. Friend the Member for Watford (Dean Russell) for all the tremendous work that was done beforehand. As has been said several times already, this is such an important issue, and it is delightful that my hon. Friend the Member for Watford has been able to put in the time and commitment to get the Bill to the stage it is now at—I hope his heart can stop fluttering soon. Of course, it is always a pleasure to follow my hon. Friend the Member for North Devon (Selaine Saxby).
I said in relation to the previous Bill that I did not have much experience, but I have a little bit more experience of this one. My constituency of Sedgefield is 240 square miles, and contains a significant number of pubs, restaurants and hotels. I do not, unfortunately, have a great deal of awareness—apart from the odd visit—of nail bars or what the quality of service is there; I have had some engagement with the teams, maybe, but that is about as far as I have taken it.
It is fair to say that anyone paying a service charge, or giving a tip, as we would normally call it, expects it to go to the staff, but it is important in this discussion to understand who the staff are. In a multinational hotel chain, the owners are clearly distant, but in a lot of pubs and small restaurants the staff may be the owners. There is some differentiation, in that there could be one person in the family who owns it, and maybe he or she should not be getting the tips, but the other could be working behind the bar or serving the food, and clearly the distribution model—however we make it up—must be fair to them as well.
Certainly, a number of pubs either start as or evolve into quasi-restaurants because the owner is the chef. They have put the effort into the kitchen and they are providing the service of food. When we look at what generates a tip, particularly in a food environment, there are two clear dimensions: the quality of the food and the person-to-person service and delivery. It is important that all of that is considered.
Dean Russell
One key component of the Bill, assuming that we get it through today and the Lords agree with us, will be the code of practice, which will effectively set out a 12-week consultation—I believe it is 12 weeks, unless things have changed—with the hospitality industry and more broadly to ensure that there are scenarios that are practicable and work in reality for organisations and staff. Those scenarios can be referred to in tribunals, should things get to that point, but, hopefully, they will give many approaches for businesses, even before the Bill becomes law, to say, “This is the right way to do it.” The Bill does not try to offer a one-size-fits-all model; it is about making sure it works, but at its heart is fairness. If the tip is for the people who have served and cooked wonderful food, then fairness within that organisation means ensuring that that tip is shared fairly across them all, and they can refer to the code of practice as part of that.
Paul Howell
I thank my hon. Friend for his very valuable clarification of the direction of travel we hope the Bill will proceed in.
The point was made earlier that the Bill is about making sure people are fairly paid. We have seen in the past people trying to incorporate the tips as part of the justification for a minimum wage. That is wholly inappropriate and I think that is one of the drivers for this Bill, which reinforces the position that people can ensure they get the appropriate pay on their payslip for their work, with tips being a separate scenario that can be discussed and followed through.
We must factor in a number of considerations about where organisations have got to. I do not think many sectors of our economy have been harder hit than hospitality over the last few years, first by covid and then by subsequent problems with labour. That puts pressures on business, and unfortunately some businesses take a step to the side of where their morals should be. This Bill will help to give clarity to that space, so it is absolutely clear that the tips belong on one side of the equation and we do not have a situation, as was mentioned earlier, where businesses are competing with each other, but one is taking the tips and putting it into the profit pot—or the cost-covering pot—and the other is doing the right thing and passing those moneys on to where they belong.
To come back to the point about cash-only or contactless-only methods of payment, another benefit of the Bill is that it provides clarity. The method of payment should not influence whether somebody gets a tip. We have all been to organisations—not in my constituency, as my hon. Friend the Member for Wantage (David Johnston) said; it must have been when I was travelling—that say “card payment only” or “cash payment only”. When a customer walks into an organisation where that direction is given, it makes them think that there is an ulterior motive. Does the organisation want cash so that it does not always go through the books? Does the organisation want contactless so that it has control over all the tips? Those are the two extremes, and both thought processes are probably unfounded in most organisations, but it puts doubt into the customer’s mind as to an organisation’s motives. The Bill will hopefully take that uncertainty away from the customer, so they know that the right thing is being done and the whole tips agenda has no impact.
Many typically small organisations are affected by this issue, so the aggregate number of people involved is incredible; I understand that up to 1 million people could benefit from it and the stats imply that they could get about £200 a year each. That is a significant amount but as my hon. Friend said, I like to think that I tip people reasonably, so I would have thought that they would get significantly more than £200 in the year. There could easily be a significant benefit for the people who are providing excellent services in our organisations, so I commend the progress of the Bill.
My hon. Friend also said that he had tried to go to as many pubs and other places in his constituency as he could, as I do. I hope the House will excuse a slight digression on this, but sometimes that has unintended consequences. I do not think that I am a particularly heavy drinker, but when I go out, I have a couple of beers from time to time. Hon. Members may have seen the “Love Your Liver” campaign in the House earlier this week. I called in and I am now going to my GP, because apparently I need to be checked out. When people go out, they should be aware of the impact on their health, because they would not necessarily know—I do not think there is anything wrong with me, but a scan tells me that there could be, so I need to check it out. I apologise for the digression, but it seemed appropriate to put a shout out for the health agenda.
I appreciate the Bill’s intention, because it is about fairness and it takes away the need for concern and gives employees the legal right to go back and check, if necessary. I endorse the earlier point about the potential for publicising it to make sure that staff and employers are aware that there is a now a line in the sand that has a legal footprint behind it, and it is not just best practice. Of course, best practice attracts the best staff who will attract customers.
Anybody who has worked in any organisation—any manufacturing, trading or sales business—knows one thing above all else: the easiest customers are the repeat customers. If a business can repeat its customers, it will be more successful and sustainable. Why do customers come back? As I said, it is because of the quality of the product, typically food or drink in this context, and the quality of the service. If businesses look after their staff, pay them correctly and allow them to keep the tips that they have earned, they will have a more successful business. I commend the Bill to the House.
Simon Baynes (Clwyd South) (Con)
It is a pleasure to follow my hon. Friend the Member for Sedgefield (Paul Howell), and I, too, pay tribute to my fellow Welsh Conservative Member of Parliament, my hon. Friend the Member for Ynys Môn (Virginia Crosbie), and to my hon. Friend the Member for Watford (Dean Russell). As was mentioned during the previous debate, a huge amount of work goes into private Members’ Bills, but I know that both my colleagues are extremely hard-working and intelligent people, so it is no surprise to me that they produced this Bill in a timely fashion and in very good shape.
I grew up in the hospitality industry. My father ran Lake Vyrnwy hotel in Wales, which is only a few miles south of my constituency. Along with my brothers, I used to work for my father in the holidays, and I have just been trying to cast my mind back to the wage that we were paid. I think—and this is a measure of how old I am—that it was 20p an hour, which in those days was actually a very good rate for a teenager.
Simon Baynes
Just in new money! It was 20p, not 20d.
That is why the hospitality industry is always of huge interest to me, not only in my life in general but, in particular, in my capacity as Member of Parliament for Clwyd South. My hon. Friend the Member for Wantage (David Johnston) said that this was not just about the hospitality industry, and I fully appreciate that, but hospitality is the key sector when we come to consider the Bill.
Clwyd South—like Ynys Môn—is an area full of tourism and hospitality businesses. Indeed, at exactly this time a week ago I was visiting Tyn Dwr Hall hotel, a wedding venue in my constituency just outside Llangollen, and talking to Tracey Owen, who runs the business and whose family own it. One of the points that came up in that discussion—and this, too, has been touched on by other Members today—was the vital importance of bringing young people into the hospitality industry. As I remember from my experience many years ago, hospitality is a wonderful training ground for young people, enabling them to learn a skill and also to learn some discipline in terms of turning up for work on time, doing a job properly and so on. Many hospitality businesses, of which Tyn Dwr Hall is a good example, go out of their way to bring in young people such as sixth-formers to do holiday work and learn a skill.
There are many other such businesses in my constituency, such as Iscoyd Park, another wedding venue; the Sun Trevor, a very popular pub; the Hand Hotel in Chirk, and, also in Chirk, Caffi Wylfa, a social enterprise-run café; The Hand at Llanarmon; The Boat at Erbistock; the Corn Mill in Llangollen; Gales Wine Bar, famously often frequented by a former Prime Minister, my right hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson), when he was the parliamentary candidate for Clwyd South back in 1997; and the Three Eagles, the Chainbridge hotel and the Wild Pheasant, all in Llangollen. There are many more I could mention, and it is probably invidious to pick out some and not speak of all, but those are just a few that spring to mind: they are businesses that I have visited and know well.
When I visited the Wild Pheasant, the staff made that point about recruiting young people into the industry. When Brexit brought changes to the employment market, it offered opportunities to people who might not previously have gone out to work at a young age in quite the way they are now, and also turbocharged those businesses to get out there, bring people in, train them up, and give them a good job. I think that that is an important background to the debate, because, as has been mentioned by many Members, it is the younger people who are often serving in hospitality businesses and are therefore the focus of the Bill.
Like my hon. Friend the Member for Wantage, I was pretty astonished that there are currently no laws directly concerning the distribution of tips as between employers and their workers. Tips and gratuities paid directly to the employer are presently the legal property of the employer, as are all service charges. It is worth repeating that, because it is pretty extraordinary. It makes the Bill all the more important.
Retention of tips is a very complicated issue. Like other hon. Members present, I would not say that there is a particular problem in my constituency, but my elder daughter has been working in hospitality in various places in London, having studied international hospitality management at university, and she says that the problem is rife in restaurants and so on. There is an idea that this is a limited problem, but that is probably not the case, which is another reason why the Bill is so important. The National Minimum Wage Regulations 1999 (Amendment) Regulations 2009 included a provision stating that tips could no longer be used to make up the national minimum wage, but they did not address the wider issue of unfair retention and distribution.
I strongly support the purpose of the Bill, which is
“to create a legal obligation on employers across sectors to allocate all tips, gratuities and service charges”
in the way that has been described. Another key point is how tips are distributed: the Bill intends
“to increase fairness for employers who already allocate all tips to workers by ensuring that all employers follow the same rules and by preventing a return to further unfair tipping practices in the future.”
Yes, we can hand tips to employees, but if we do not make distribution among employees fair, we will still not have fully solved the problem. Employers will therefore be required
“to have regard to a statutory code of practice…when complying with their obligation to allocate tips fairly.”
That is vital.
I note two other points from experts in the industry. Michael Kill, CEO of the Night Time Industries Association, has said:
“At a time when the hospitality industry is dealing with record vacancy levels, attracting people into work in hospitality businesses is already difficult enough. Taking tips off staff at a time when the cost of living is going up…the potential external economic pressures on our staff need to be considered.”
That is a fundamental point.
Kate Nicholls, chief executive of the industry body UKHospitality, is known to many Members of this House. She does a fantastic job as an ambassador for the hospitality industry. I pay tribute to her: during the covid pandemic, she did more than perhaps any other representative of the hospitality industry to bring its concerns to the Government, with fruitful results. She has urged the Government to work closely with businesses and employees to make the system work for all as venues face mounting costs:
“For hospitality businesses…customers tipping with a card incurs bank charges for the business, and many also employ external partners to ensure tips are fairly distributed among staff”.
That is an important balancing point that we need to consider.
As somebody who was born and bred in the hotel business, I have nothing but support for this tremendous Bill. I commend it to the House.
James Grundy (Leigh) (Con)
I commend my hon. Friends the Members for Ynys Môn (Virginia Crosbie) and for Watford (Dean Russell) for their work on this important Bill.
It is a pleasure to follow my hon. Friend the Member for Clwyd South (Simon Baynes), who made an excellent speech. On a previous sitting Friday, I mentioned my grandmother, who was from Chirk in his constituency, and ironically, it was in that part of the world that I learned, approximately 40 years ago, what a tip was. We regularly went on holiday to Llandudno, a lovely seaside town. We were once in the tearooms close to the seafront, and my grandmother had left a 50 pence piece on the side of her teacup. I asked, “What are you doing, Grandma?” She said, “Well, this is what is known as a tip.” I was about five years old at the time, and I asked, “What’s a tip?” And she said to me, “It’s a token of thanks to the member of staff who served you. It is not a payment for the services or the food you’ve been provided with. You are thanking them for going above and beyond in the service they’ve given you.” It is tremendously important to recognise that.
As many colleagues have said—of course, this is bound up with respect for the minimum wage—tips are not there to make up wages or for other purposes. As I have said before, tips are a token of thanks, not a means of making up income. It is important to recognise that that is an entirely separate matter. I have always felt that about industries in which people receive tips.
My hon. Friend the Member for Wantage (David Johnston) said it well about America. I still remember, as will many Members, the “Reservoir Dogs” scene in which one of the main characters—one of the Misters—is asked to give a tip in a café. He quite famously says, “I don’t tip”, and there is a huge argument around the table about the culture of tipping in America. They say, “If you don’t tip then how are these waitresses going to manage? How is this fair?” I always thought that an unusual scene because, at the time that film came out, people basically felt that tips should go to the staff, but they would have considered the idea that tips were needed to make up wages pretty unpleasant.
Of course, that is why British people who go to America are regarded as absolutely terrible tippers. We do not see it as a means of making up wages, but as a token. In America, I believe that the bare minimum one should consider tipping is 10%, although I could be wrong.
James Grundy
I thank my hon. Friend for clarifying that. I am afraid that I have never been to America, but I hope to have the opportunity to go.
As my hon. Friend the Member for Watford said, there is a difference between a tip and a service charge. It is important to consider them slightly differently. The main reason is that a tip is often voluntary, and if we feel that we have received bad service, we will simply not leave one. A tip is given to the individual who served us for their particular service—a token of thanks to them individually—whereas a service charge is, or should be, as my hon. Friend said, disbursed to the staff as a whole. Sometimes a service charge is not voluntary but appears on the bill, so it is not a personal choice. A distinction should be made on that.
Let me talk briefly about something that we have not mentioned. My hon. Friend the Member for Watford has said that further work will be done, so I hope that this will be given some consideration: any potential taxation of tips should be different from taxation of service charges. Tips are effectively gifts, which are taxed differently, so they should be considered in a slightly different manner from service charges. I realise that that is a slightly esoteric point—perhaps so esoteric that it may not have been considered in this debate or during the drafting of the provisions.
Dean Russell
Taxation is wholly separate from this Bill. The Bill is very much about BEIS. To give my hon. Friend some reassurance, what the Bill will not do is change anything on taxation.
James Grundy
I thank my hon. Friend for his clarification. I have covered most of the points I wish to cover. We have heard a number of very sensible and reasonable contributions. This Bill has overwhelming cross-Bench support. It is long overdue, but it is terribly sad that we have to legislate to deal with this problem. It is pretty cheap for businesses to try to take tips for themselves. It is my view that they are always meant for the staff, as a token of thanks to people for service above and beyond what should be expected.
Richard Fuller (North East Bedfordshire) (Con)
As is often the case on days such as this, one prepares an extensive speech only to then be given guidance that one should be brief. I shall therefore seek to rattle through a number of points relatively quickly and try to be as helpful as I can to the Minister.
I am interested in the explanatory notes. As you probably know, Mr Deputy Speaker, we had a public consultation in 2013, another consultation in 2016 and another response to the consultation in 2021, and now we are in 2023. Good Lord, eight years! Why has it taken so long? A number of colleagues have noted that there is no law on this issue, but paragraph 15 of the explanatory notes state:
“In terms of legal ownership: tips and gratuities which are paid directly to the employer…are presently the legal property of the employer.”
It goes on to say:
“Tips and gratuities which are paid in cash directly to a worker are the legal property of the worker”.
A number of MPs have mentioned the transition from cash to card. I am interested in the Minister’s view of the implications in terms of legal ownership and whether this Bill is of particular assistance.
I am interested that the impact assessment refers to the possibility for complaints to be made to the employment tribunal as a result of this legislation. Have the Minister or his team made an assessment of the likely impact? I would guess it is limited and perfunctory, but we know that employment tribunals are under a lot of pressure to get through pieces of work, so it would be helpful to dot the i’s and cross the t’s.
I am also interested in table 12, on page 26 of the impact assessment, which looks at the summary of costs by business size and provides central estimates. There is no greater champion in this House for small businesses than the Minister, so he will have noted the distribution of costs among micro, small, medium and large businesses as a result of complying with this measure. Rather than showing a nice, graduated increase in costs whereby the largest businesses take on the largest costs, the table shows that quite a lot of the cost falls on the very smallest businesses. I am interested in hearing the Minister’s thoughts on that.
I thank my hon. Friends the Members for Watford (Dean Russell) and for Ynys Môn (Virginia Crosbie) for proposing and supporting this Bill. I will end with some questions to the Minister directly about his approach to tips, on which he may wish to advise the House while speaking with his hand on the Dispatch Box. First, does the Minister tip or not? Secondly, how much does the Minister routinely tip? If someone else offers to pay for the meal, does the Minister offer to pay the tip?
David Johnston
Is my hon. Friend speaking from personal experience of the Minister?
Richard Fuller
Sadly, the Minister has never bought me a free lunch, but that is no disparagement of his character.
Does the Minister pay a tip if it is automatically applied to the bill? The other points are a little frivolous, but this is a serious point: if the automatic charge is a service charge, does the Minister pay a tip in addition? That is important because there is a lot of confusion about whether a service charge is a tip. I do not think it is, and I still do not know whether it is covered by this Bill. Has the Minister ever crossed out a service charge on a bill and not paid it? Does the Minister ever dare not to pay a tip? He might choose to give the Government’s response on all those matters rather than a personal one, but I wanted to get those questions on the record. In the interests of time, I will end my comments there.
Fleur Anderson (Putney) (Lab)
I congratulate the hon. Member for Ynys Môn (Virginia Crosbie) and the hon. Member for Watford (Dean Russell) on all their work on this Bill. It will make such a difference to so many people across the country, and I declare an interest, because it will make a difference for two of my older children who are working in and out of the hospitality industry and are very interested in the progress of the Bill.
The Bill is righting a wrong of many decades. When I was a waitress in a hotel, I had to drive home at the end of my shift. I was the most junior member of staff, and all the other staff lived in the hotel and would drink the tips at the end of every night, so I would not get any of those tips. I was not able to ask my employer for a written copy of the policy on tips, and I was not able to find out what my share of the tips would be. I have felt for quite a long time that that was an injustice, and I am glad that the Bill will right the many injustices that are happening on a daily basis across the country.
I support rewarding customer service and transparency and confidence for businesses, customers and employees alike. This is fairer for businesses that do the right thing. It is fairer for people who tip and expect it to go to the worker; as many Members have said, lots of things are not clear about that at the moment, and I hope it will be much clearer in future. It is also fairer for the employee, who will get the money that has been given by customers for the work they have done. Labour supports the Bill, and I am pleased to see that the Government are behind it as well. It also has the support of unions—especially the GMB, which has been campaigning on this for a long time—and UKHospitality.
Like other Members, I am surprised that there is no law on tips at the moment. However, as I said in the previous debate, this measure should have been in a comprehensive employment Bill, which has been promised time and again by Government. It is disgraceful that all this time, hospitality workers and workers in the beauty industry have been cheated out of their money. It is clear that some hospitality workers are not getting their tips, with companies instead using them to subsidise other workers’ wages, to pay for accidents such as unpaid customer bills or to pay for so-called administration costs that are very opaque. In 2015, evidence was found that two thirds of employers in hospitality were making deductions from staff tips, in some cases of 10%. With the pandemic and more people paying by card not cash, there are well-founded concerns that workers not receiving tips in full is becoming standard practice, so this law is very timely.
The Government have repeatedly promised to tackle this issue but failed to do so until now. They published a call for evidence in 2013, which showed broad support for action on fair tipping. They then promised this measure at the Conservative party conference in 2018 and in the 2019 Conservative party manifesto, and they committed to include it in the employment Bill in December 2019, but that was dropped from the last two Queen’s Speeches. In the meantime, the latest figures suggest that staff may have lost over £1 billion of tips while waiting for this legislation over the last five years.
Frontline workers in pubs, bars, cafés, restaurants, hairdressers and beauty salons are often the lowest paid. With the Tories’ cost of living crisis worsening by the week, every penny counts, and we desperately need this legislation. In 2020, members of Unite the union at the Ivy tried to lodge a collective grievance against their employer on a number of issues, including withholding tips, but with no formally legally backed process to take the complaint forward, this was dismissed.
I thank my hon. Friend the Member for Reading East (Matt Rodda) for his speech highlighting how important the Bill will be for so many of his constituents, especially for the hospitality sector and for students, and I agree with him. I am proud that it was a Labour Government who, in 2009, first intervened in this issue to make it illegal for tips to contribute to the national minimum wage, just as I am proud that, some years earlier, it was the Labour Government who introduced the national minimum wage itself.
Richard Fuller
The hon. Lady is right to congratulate the previous Labour Government on introducing the national minimum wage. Does she also agree that it is good news that the Low Pay Commission report has produced details showing that between 2019 and 2022, young people had the largest increase in wages? It was a 25% increase for 16 and 17-year-olds, compared with 11% for those over 23. Does she agree that that is very good news indeed?
Fleur Anderson
An increase in the national minimum wage is very good news. I remain proud that it was the Labour Government who first brought that in and did not drag their feet for years and years over it.
Back then, too many bad bosses were using tips, which should be a voluntary extra to top up basic pay, as has been underlined by so many Members today. Once again, Labour has been ahead of the curve on this issue. The shadow Secretary of State for the future of work, my good colleague and right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), committed last year to stamp out unfair tipping practices, including through many of the provisions included in this Bill; to ensure that all tips, gratuities and service charge payments are allocated to workers in full without deductions; and to ensure that a written policy is produced to make it clear to staff how all tips are allocated, and for those tips to be paid in full at the end of the month following the payment.
Labour will ensure that tips are allocated fairly through a tronc, which is genuinely independent of the business, and we will announce proposals to allow exploited workers to lodge any workplace grievances collectively—a right denied to many hospitality workers seeking the return of deducted tips. A Labour Government will deliver for working people, ending unjust deductions and ensuring that workers themselves decide how tips are distributed.
In conclusion, I have a few questions for the Minister. First, we have before us another Bill on workers’ rights, following the passage of the previous Bill on workers’ rights. If the Government are to introduce an employment Bill effectively through supporting piecemeal private Members’ Bill such as this, which parts of the original employment Bill are they going to drop?
Secondly, many workers end up on the end of already illegal practices while at work. Without stronger enforcement of standards, there is a real risk of Bills such as this failing to meet their potential. I thank the Minister for his earlier response about the consultation on a single enforcement body. Does he believe that such a body for workers’ rights would help to enhance people’s ability to get justice against unscrupulous employers?
Thirdly, measures to strengthen the rights of hospitality workers are welcome, but ONS statistics from May last year show that nearly 25% of workers in the food and accommodation sectors are on zero-hours contracts. Hospitality workers desperately need security and flexibility, so will the Minister commit today to banning these one-sided, unfair zero-hours contracts?
I close by congratulating the hon. Member for Ynys Môn on getting this Bill so far. It will have a massive impact. It has our support and I wish her the very best in the remaining stages.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)
First, like the shadow Minister, let me declare my interest. I have two young daughters who work in the hospitality sector and who may benefit from this legislation. Happily, I am pleased to say that the Bill will also benefit around 1 million other people to the tune of £200 million per annum.
I thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie)—I hope I have pronounced her constituency correctly because we have had some problems with pronunciation this morning—for her very hard work in bringing the Bill forward to Third Reading. The Bill is about fairness, transparency and, again, our efforts to make this society a fairer one. I am pleased that she has taken on the sponsorship of the Bill. Obviously, I thank the previous sponsor, my hon. Friend the Member for Watford (Dean Russell), for his work on such an important piece of legislation and for his campaigning on this issue. This is not just about his work in taking the Bill forward, because he has been amazing in campaigning on this. I thank my predecessors —not just him, but my hon. Friends the Members for Sutton and Cheam (Paul Scully) and for Loughborough (Jane Hunt).
It has been brilliant to hear the support in the House for these measures, and I will briefly reiterate why the Government are supporting the Bill. A few years ago, stories were highlighted in the news about bosses wrongfully pocketing tips intended for their workers. Both the Government and the public were appalled by that; money left by customers who wanted to recognise the hard work and excellence of staff was in some cases simply treated as part of the revenue of the business. That is why my Department took action to understand the scale of the problem and launched consultations, as has been mentioned. We were then able to publish a full impact assessment to support the Bill. The Government believe that tips should go to the staff who earn them, rather than the business, and that businesses that withhold tips from staff are wrongfully benefiting from money intended for hard-working staff.
The Bill prevent therefore employers from making deductions when distributing tips, apart from those required or permitted by existing legislation, such as under tax law. That will ensure that all money left by customers is passed to workers in full, as intended. The Bill also establishes a requirement to allocate tips fairly between workers at a place of business. That protects vulnerable workers and prevents exploitation. As we have mentioned, a voluntary code of practice on tipping was published in 2009. Our evidence shows that voluntary guidance alone was not enough to stamp out bad practice. Therefore, this Bill goes a step further and requires employers to give consideration to a statutory code of practice when considering how tips should be distributed. The code will continue to be developed by the Government, in partnership with key stakeholders, and will be subject to a full consultation period before the final version is brought to this House for approval.
Let me address some specific points made by hon. Members in this debate. The hon. Member for Reading East (Matt Rodda) talked about the benefits to lower-income workers and to towns with lots of hospitality workers, such as Reading, and indeed places in Thirsk and Malton and many other constituencies represented here today. My hon. Friend the Member for Watford talked about snollygosters. I do not know whether that piece from Quentin Letts referenced my hon. Friend personally, but being mentioned in one of his articles is always a badge of honour, regardless of whether the comments are derogatory. My hon. Friend also said that this measure is about fairness and clarity, and the simple question when one is handing over a tip: “Do you get this?” He said this should not be about topping up salaries. I say that it should be about driving up service, as these tips are paid to people who do a good job. Let me answer the question put by my hon. Friend the Member for North East Bedfordshire (Richard Fuller) on my tipping policy shortly.
There are some burdens on businesses as a result of this measure, particularly on record keeping. We should bear that in mind when we legislate, but, on balance, I think this Bill is fair. My hon. Friend the Member for Cheadle (Mary Robinson) talked about fairness and about how most employers do the right thing but some do not. She also talked about the confusion regarding making cash or card payments, and what happens to such payments. This is not just about hospitality, as this applies to other industries, such as the beauty industry. I should point out that this Bill does not cover every sector; requirements in here about record keeping and the like, and the passing on of tips, apply only to businesses that receive tips on a more than exceptional or occasional basis. So this does not cover every instance; it applies just where tips are routinely paid.
My hon. Friend the Member for Wantage (David Johnston) talked about not just hospitality, but the key element of access to cash, on which the Government are undertaking another stream of work.
My hon. Friend the Member for North Devon (Selaine Saxby) talked about the fantastic hospitality venues that are essential to the economy in her area—as, indeed, they are to the economy in mine. She is a huge advocate for business. Many of us on the Government side of the House are for business because we are from business. I know that she is, and I welcome that.
My hon. Friend the Member for Sedgefield (Paul Howell) talked about his local hospitality venues. I have visited a number of them, not least Sedgefield racecourse on occasion, which is always a treat. He talked about how this change will be overseen and gave the example of sole traders. This legislation will be employment law and will apply only to people who are employees. The code of practice will go into that in more detail.
My hon. Friend the Member for Clwyd South (Simon Baynes) was born and bred in the hospitality sector and so speaks with real authority. He used the words that I probably mention more than any other in my role as Minister for business: “fair” and “level playing field”. That is absolutely right, and that is what we seek to achieve. He also talked about the representations from Michael Kill from the Night Time Industries Association and how this change is important to attract workers into the sector, and about the great work of Kate Nicholls for the hospitality sector.
My hon. Friend the Member for Leigh (James Grundy) talked about this being a token of thanks. That is absolutely right, because that is what drives service.
My hon. Friend the Member for North East Bedfordshire, as always, challenged us in a number of areas. He mentioned the number of consultations we have held, and basically told us to get on with it. That is what we are doing today, of course: getting this legislation through and putting it into effect as quickly as possible. He talked about whether employment tribunals will have the capacity to deal with these issues. Work is under way across Government to expand capacity within employment tribunals. He talked about cash and cards, and what goes to whom. As he said, cash is by right the property of the employee, unless the employment contract says that it is not. The Bill will clarify that, in any circumstance, whether there is a service charge or not—that is also covered—this money will go to the employees. That is a critical part of this legislation.
Richard Fuller
It would be helpful if the Minister confirmed that, as of this Bill passing, when people see a service charge on a bill, they can say that it is covered, that it counts as a tip and that it will go to the employees rather than to other uses within the firm.
Kevin Hollinrake
That is correct.
My hon. Friend also talked about my personal tipping. Do I tip? Yes. By standard, if there is no service charge, I would usually tip 10%, or sometimes more, based on performance. Sometimes I will tip nothing, if I do not feel that the service has been at that level. Do I tip if I do not pay for the meal? I normally pay for the meal as well actually, but I have offered to on occasion. I think that covers all his questions, but if he has any more, we can deal with them by separate means.
To respond to the shadow Minister, I again refer to my earlier comments about an employment Bill. The key thing is that we are getting on with key legislation that we think is important. It is not just this legislation; there are other pieces of legislation addressing flexible working, carer’s leave and other issues. She talked about enforcement, which is hugely important. Legislation without implementation is pointless. One of the most effective parts of our regulatory system in the UK, in my view, is employment tribunals. There is no pan-employment regulator in the UK, which, when we think about it, is quite a surprise—there are some in some sectors. There are 30 million people employed in this country, and employment tribunals do a fantastic job, at a fraction of the cost of other regulators. It is ex-post regulation, and I think a more effective means of doing that is through employment tribunals, which are principally a mechanism for enforcement.
The hon. Member talked about zero-hours contracts. A very small proportion of people in this country are on zero-hours contracts—2% to 3%. Many of them are on a zero-hours contract for good reasons and want to be on one, but she raised an important point. This is something we are looking at and determined to tackle. There are some abuses of the system, and we are keen to bring forward new regulations to make sure we tackle that area.
In conclusion, bringing forward the new rules will protect more than 2 million workers from bad bosses and give them an avenue to seek remedies. Businesses will be assured they are not being undercut by companies where bosses keep tips for themselves and consumers will have increased confidence that their tips go to the workers they are intended for. The new rules are backed by Government evidence and analysis. The Government are therefore pleased to reiterate their support for this private Member’s Bill. It has been wonderful to see the support for it in the House during today’s debate.
If I may, I would like to list the civil servants involved, and there are a number of them: Flora Strange, Lucy Allatt, Yasna Reynolds, Mary Smeeth, Tony Gordon, Joe Giles, Simi Bhamra, Bex Lowe, Richard Lewis, Abigail Bridger, Rachel Senior—I can see the Whip moving closer to me; oh no, it’s not, it is the next Minister. I will conclude very shortly!—Anthony Morris, Cora Sweet, Nadine Othman, Laura Matthews, Clara Thiel, Patrick Day and Harry Ravi. Finally, I very much look forward to working with my hon. Friend the Member for Ynys Môn and stakeholders to support the passage of these measures as the Bill moves to the House of Lords. I commend the Bill to the House.
Mr Deputy Speaker (Mr Nigel Evans)
If the Minister was ever to invite us all out for dinner one night, I think we would like to see his tipping style in action, wouldn’t we? Fascinating.
Virginia Crosbie
With the leave of the House, I would like to thank all hon. Members for their contributions today. In particular, I emphasise the work of my hon. Friend the Member for Watford (Dean Russell) and thank him for his kind words. He also taught us a new word, “snollygoster”. We heard about workers’ rights and he emphasised us working together as a House.
The hon. Member for Reading East (Matt Rodda) talked about the importance of the Bill for university towns such as Reading. My hon. Friend the Member for Cheadle (Mary Robinson) mentioned a campaign to make sure people know about the measures and how we have amended the Employment Rights Act 1996. My hon. Friend the Member for Wantage (David Johnston) waxed lyrical about Christmas tips and how he plans to visit all his pubs. We had a fantastic romp through all the fantastic places to visit and eat in the constituency of my hon. Friend the Member for North Devon (Selaine Saxby).
My hon. Friend the Member for Sedgefield (Paul Howell) highlighted how important it is that the Bill will help businesses to look after their staff. My hon. Friend the Member for Clwyd South (Simon Baynes) grew up in the Lake Vyrnwy Hotel, a wonderful, wonderful hotel. He paid tribute in particular to Kate Nicholls. From my hon. Friend the Member for Leigh (James Grundy), we had the great image of a scene from “Reservoir Dogs” and the culture of tipping in the US. My dog sends her best wishes to my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who talked about impact assessments and small businesses. Lastly, the shadow Minister, the hon. Member for Putney (Fleur Anderson) shared her experiences of not being able to drink her tips and the significance of the support of unions and UKHospitality.
I would like to end by thanking the Minister for signalling the Government’s continued support for the Bill. I hope hon. Members in all parts of the House can agree that this is an essential piece of legislation, which will help to promote fairness and transparency to ensure that workers receive the tips they earn. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Mr Deputy Speaker (Mr Nigel Evans)
Congratulations, Virginia Crosbie and Dean Russell.
Employment (Allocation of Tips) Bill
Monday 23rd January 2023
(1 year, 10 months ago)
Lords ChamberRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text
Employment (Allocation of Tips) Bill
Friday 3rd March 2023
(1 year, 8 months ago)
Lords ChamberRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Lord Robathan (Con)
My Lords, this is a Bill entirely about fairness. Indeed, a Member of the other House said to me only this morning, “What is there not to like?”. It was started in the other place by my honourable friend the Member for Watford, Dean Russell, and then continued—for reasons which I will not bore you with—by my honourable friend the Member for Ynys Môn, Virginia Crosbie. What the Bill does is quite simple: it creates a legal obligation on employers to pass on tips, gratuities, service charges—for ease of reference, I shall refer to all these as “tips”—to employees in full. The only deductions permitted are those required or permitted under other statutory provisions, specifically tax law.
Which of us has not wondered, or indeed asked, a waitress or waiter whether that person gets the extortionate service charges that often end up on the end of our Bills? We do not expect businesses to take a slice of anything we pay for service, so this Bill will create a level playing field for businesses that already pass on tips to workers in a fair and transparent way. At the core of the Bill is the creation of a legal obligation for employers to distribute all tips to workers without any deductions; this includes mandatory and discretionary service charges which are added automatically on to customers’ Bills by some hospitality venues. When customers pay service charges, they—we—expect them to go to workers in full, and they jolly well should.
Ensuring that tips are passed on to workers in full, with no deductions by employers, could make a real difference to workers’ incomes. We are talking typically about workers in hospitality such as restaurants, but it would also apply elsewhere; for instance, in taxi services such as Uber, croupiers in casinos or hairdressers. Where employers receive tips directly from customers or have control or significant influence over the distribution of tips which workers receive directly, the Bill will create that legal obligation for them to distribute those tips to workers in a fair and transparent manner. The obligation will attach to the total amount of the qualifying tips paid at, or otherwise attributable to, a place of business of the employer.
To clarify, the Bill does not cover tips which employers do not receive or have control or significant influence over. For example, if workers receive cash tips, perhaps put in a physical pot, and divide them between themselves without any control or significant influence from the employer, those tips are not affected by the Bill. It will not interfere with existing tipping arrangements where employers do not influence or make deductions from tip allocations.
It is important that we retain flexibility for employers to choose how to distribute tips so long as that distribution is fair. Some employers may choose to use a tronc system to distribute tips—I actually knew what a tronc system was, but, for clarity, it is an arrangement commonly used in the hospitality sector where an employer delegates the collection, allocation, and distribution of tips to a person or persons who are known as a “tronc master” or a “tronc operator”; that person is often, in a restaurant for instance, the head waiter. The Bill does not seek to regulate the operators of independent tronc systems, although the employer will need to be satisfied that it is fair overall to make arrangements for distribution through a tronc.
The Bill includes provisions for the Secretary of State to issue a statutory code of practice which will promote fairness and transparency in relation to the distribution of qualifying tips, gratuities and service charges, and help tribunals determine whether it is fair for an employer to make certain tronc arrangements. Employment tribunals must have regard to relevant provisions of the code when determining whether an allocation of tips, or making certain tronc arrangements, is fair, and the code of practice will consider some of the factors which may be relevant to fairness.
The reason for the code is to capture the nuances of fair tipping practices across and within sectors. We need to ensure that we put in place a framework that appreciates the differences from business to business and allows flexibility. However, to reassure noble Peers, there will be a full consultation on the code with subsequent approval by both Houses—or not, of course.
Transparency is a crucial part of the Bill and information plays a significant role. The Bill creates an obligation on employers to have a written policy on dealing with tips, which must be made available to all workers. In order for workers to understand whether their tips have been distributed fairly, the Bill also creates a new right for workers to make a request for information relating to their individual tipping record and the overall amount of tips that the business has received in a given time period. This does not add any onerous obligations or regulations on an employer or business—apart, one might say, from writing a policy—for most employers will already have a system in place for the fair distribution of tips.
The Bill will be enforced by workers through the employment tribunal system, and provides tribunals with remedies and situations where an employer has made deductions from tips or not allocated tips in a fair and transparent way. For general knowledge, I point out that the majority of employment disputes are settled before they reach an employment tribunal, and we expect referrals to such a tribunal under the Bill to be relatively rare or unusual.
If an employer does not allocate tips fairly between workers, the employment tribunal can order the employer to revise any allocation of tips that it has previously made, recommend that the employer deals with tips in a certain way or make a payment to a worker or a number of workers of the employer, so that they receive the tips that they should have received. It might also compensate workers for any related financial loss attributable to a breach of these provisions by up to £5,000.
I hope this gives an overview of the Bill and the provisions within it. As my honourable friend down the other end said, “What is there not to like?” Both parties opposite, Labour and the Liberal Democrats, raised no problems with the Bill during Committee in the Commons—they raised a few issues, but not real problems—and support the Bill.
I hope noble Lords from all sides of the House will join me in helping the Bill succeed. It is an opportunity to bring back change that will positively impact those businesses that are already doing the right thing and, especially, those workers who receive tips. I beg to move.
Lord Browne of Ladyton (Lab)
My Lords, it is a pleasure to support the Bill sponsored by the noble Lord, Lord Robathan, and to anticipate its provisions finally reaching the statute book. In opening Second Reading, he outlined the Bill’s functions with thoroughness and lucidity. I beg to say that the longer I spend in this building the more I realise that we are all on a political journey. I hope that his enthusiasm for and championing of a Bill that makes a real and positive difference to some of the lowest-paid workers in our country is an indication that he has come a long way from where he was in 1997-98, as evidenced by his voting record on the then National Minimum Wage Bill.
I began by saying that it is a pleasure to support the Bill. It is an equal pleasure—a number of noble Lords may repeat this remark—to do so without caveat or reservation. It engages a simple question of equity: money given in tips to serving staff should be theirs without fear of depredation from their employers. This question is particularly acute when the hospitality industry is attempting to regain its feet after the pandemic and is being further buffeted by rising energy prices, the cost of living crisis and, more importantly, labour shortages. This should encourage people to work in the industry, knowing the prevalence of the problem that it addresses.
The Bill is comprehensive in scope, extending the legal right to a fair allocation of tips not merely to directly employed workers but to agency staff and those allocated tips through a third-party tronc scheme. I must admit that I did not know what a tronc scheme was until I read the Bill. Crucially, under Clause 4, it ensures that workers receive tips no later than the end of the month following the month in which they were paid by customers. I also welcome the measures in the Bill giving adequate scope for enforcement, and commend those involved in the Bill’s drafting and ensuring its passage through the other place. I look forward to these legal protections being extended to hospitality workers as soon as possible.
That last point leads me to ask why this has taken so long. The first call for evidence for this legislation was put out by the then Department for Business, Innovation and Skills in August 2015. Since then, we have had five different Prime Ministers, eight Secretaries of State and innumerable reshuffles among junior Ministers. Indeed, not only does the government department that published that call for evidence no longer exist, even its successor department has gone the way of Nineveh and Tyre. This measure has been included in two general election manifestos and four Queen’s Speeches, and has been the subject of two consultations. It is fair to say that, were the staff who are the subject of the Bill to adopt such a laggardly approach to their own work, the allocation of tips would be a purely academic exercise.
This should cause us seriously to reflect on the efficiency of government over the last eight years. The Bill is limited in scope, rights an obvious wrong and has cross-party support. If a measure of such comparative simplicity can take eight years to pass, something has gone profoundly wrong with our lawmaking in this country. I will resist the temptation to reach outside the scope of today’s proceedings to consider the silting effect that the necessity of dealing with Brexit and its consequences has had on our legislative efficiency, but will merely leave it hanging in juxtaposition to my points earlier.
I welcome the Bill and once again commend the work that the unions, other workers’ campaigning groups and parliamentarians on all sides have done in ensuring that it is now likely to reach the statute book. It will have my full support as it passes through your Lordships’ House.
Baroness Berridge (Con)
My Lords, I too thank my noble friend Lord Robathan for introducing this small but important Bill, especially as, like many noble Lords, I have been a receiver of tips, not only a giver. Although the loophole has been closed so that tips cannot be relied on by employers not paying the national minimum wage, tips are often given to those on that lowest lawful wage and can be a vital part of overall wages. Back in the day, it was so encouraging on a long shift in the local gastropub to open the drawer and see a number of paper notes along with the coins in the tips bowl. It really was an incentive for the rest of the shift and an extra bonus when saving for university.
It is only right to have a distribution policy that is fair and for employees, not the employer. It is often a personal payment, such as by a lone woman travelling home at night in a cab or Uber, when the driver gets you home safely and you know that they have waited until you are safely inside the building before driving off. These extra kindnesses really matter and should be rewarded personally.
I welcome, in Clause 6, that there should be a written policy to enable claims to be taken to the employment tribunal, giving employees the requisite information, but it would be good if that policy were simple enough to be on display for customers. I think Clause 6 limits it only to workers. How tips are distributed can affect whether a customer wants to give a tip. It can also change the way that tips are given. Like my noble friend Lord Robathan, I have often asked waiting staff and given cash if I am informed that they will not get a tip given by a card payment.
The Bill has also intrigued me. Although I am aware that my noble friend cannot answer the following question directly, I ask: what happens to gratuities added to bills paid by card in the dining rooms or guest rooms in Parliament? I hope that he will pass that question to the relevant authorities so that noble Lords will know the answer.
I agree with the noble Lord, Lord Browne, that it is sad to note the many commitments that have been made on this matter. I particularly cite October 2018, when the Conservative Party made a commitment to bring this into law, but it has taken four and a half years since then to legislate. It is also sad to note that it is necessary to use the law to achieve what should be normal employer behaviour. As my noble friend said, what is there not to like? Many or most employers, apparently including Uber, pass on tips paid electronically, but it is not always the case.
Sadly, the compensation orders against rogue employers, in Clause 8, might not be enough. I hope that the media will keep a watchful eye, as it is really only their revelations, with the transparency they give and the shame attended to them, that bring about the best sanctions. I anticipate that we will see some class actions brought in response to enable employees to have their requisite compensation orders and get their money back. I welcome the Bill and hope that it has a swift passage through Parliament.
Lord Mitchell (Lab)
My Lords, if it were not for tips, I probably would not be standing here today. In the mid-1960s, I was living in New York, studying for my master’s degree in business administration at Columbia University. Sadly for me, I had no money, and New York city is no place to be poor, so I got a job as a waiter at a restaurant enticingly called Your Father’s Mustache. It was located in Greenwich Village; it was noisy and crowded, and it sold beer and cocktails, burgers and huge sandwiches—I loved it. I worked four nights a week, starting at 9 pm and finishing at 3 am. It was hard work, especially because, by 8.30 am the next day, I had to be at my class, all prepared. My basic pay was 99 cents per hour, minimum wage, plus tips. Being English, at the time of the Beatles I achieved some degree of notoriety, and I was good at hustling for tips. I would earn about $60 per evening—and that was in 1965.
In the days before credit cards it was all about cash tips. I learned about dynamic tipping—assessing the customer and working out how best to maximise my reward. Most important of all was positioning the change on the tray so that he took the coins and notes nearest to him and left me with the tip I felt I deserved. For me, it was the difference between happiness and misery. I secured my MBA, returned to London, had a fulfilling career in IT, and here I am today. Without those tips, who knows how it might have turned out?
All this is to emphasise as strongly as I can that my heart and soul are with the recipients of tips. I know just how crucial these payments are to those who work in pubs, bars and restaurants. I must thank the noble Lord, Lord Robathan, as well as Dean Russell in the other place, for introducing this Private Member’s Bill, which now has Government support. It is a vital Bill, and when it becomes an Act it will give certainty of earnings and security to many hundreds of thousands of people who work in the hospitality industry.
I would like to raise a few areas where I believe we are at risk of unintended consequences. I ask the noble Lord to consider these points, and I would welcome the opportunity to meet him prior to the Bill going to Committee.
The first point concerns agency workers. I fully understand why, at first glance, it seems equitable that agency workers qualify for sharing in the tip allocation on the same basis as directly employed staff. But I am told that agency rates have now gravitated upwards, to the extent that there is now an implicit tipping share built into the daily fee. Therefore, if agency people also share in an establishment’s tips, does it not mean that, in effect, they get the benefit of the tip twice over? That cannot make sense. If it stays as the Bill proposes, will that not mean that many staff will move towards being hired as agency workers rather than direct employees? That cannot be a good thing.
The second point concerns credit card payments. I know that fundamental to this Bill is the concept that employees should participate in the sum total of all tips, with no deductions. However, I think credit card charges should be exempted. If there is a built-in tip of, say, 12.5%, and the total bill is paid by credit card, which most bills are, then the establishment will have to pay the credit card charge on not only the base cost but the tip portion of the bill. Surely the credit card fee is a direct cost of the transaction, and the restaurant and the staff should bear that cost proportionately. My suggestion is that a maximum deduction of up to 2% should be netted off from the tipping pool. That does no more than cover the additional cost to the business arising from the customer’s generosity, and with a maximum rate set to avoid any abuse or excessive deduction from an unscrupulous operator.
Finally, I would like to address the issue of multiple-site operators. The Bill as it stands states that the tipping pool should originate from the bar or restaurant where the employee works. That makes sense. But there are many restaurants and bars which have associated premises, and it is not uncommon for staff to be transferred from one to another. Imagine a situation where a successful restaurant wants to open another restaurant and wants to transfer skilled staff from one to the other to get the place up and going, or where a business operates a large establishment which generates significant tips and a smaller restaurant a mile down the road with a much lower level of tips. New restaurants take time to find their feet and build up clientele. Operators will, from time to time, need to move staff from one premises to another, perhaps to cover illness or staff shortages. If the Bill stays unamended, it will remove the incentive for staff to move from a successful restaurant to a start-up, or from a larger site to a smaller one. That does not make sense. Surely a group should have the facility to amalgamate its tipping pool across multiple restaurants.
As I said, I would welcome the opportunity to discuss these issues with the noble Lord. The hospitality industry was battered by Covid, and now it is being battered by inflation and staff shortages. We have a good Bill before us. We should do all we can to minimise the burden on employer and employee alike.
Lord Shipley (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Mitchell. He raised a number of interesting points, particularly around agency workers, credit card fees and new premises. I hope the Minister will be a in position to respond to some of those, because I hope that the Bill will get a speedy passage through the House. I am particularly grateful to the noble Lord, Lord Mitchell, for explaining the concept of dynamic tipping to us, which he clearly made great use of if, all those years ago, he was securing $60 per evening—which was then a very significant sum of money—to assist him in his studies.
As the noble Lord, Lord Robathan, said, what is there not to like? I subscribe to that view. This is about fairness for the 2 million people who receive tips as part of their employment. As the noble Baroness, Lady Berridge, said, this will help to increase low incomes, and that aspect of the Bill should not be understated.
Like others, I share the concern, as a customer, around what happens when I pay a tip or a service charge, and what the meanings of the terms that are used on the bill actually are. We should say that many businesses operate good systems for ensuring that tips and gratuities reach the staff customers intend them for. However, when I pay a service charge, I expect it to go to the staff providing the service, through a system that is transparent and which they understand. I have not seen a case for any part of the service charge being deducted for the employer’s benefit, although I think there is an issue around the credit card charge, which the Minister might like to clarify when he replies.
The new code of practice is going to be extremely important. It will need extensive publicity to ensure that the new requirements are being met, particularly those in Clauses 2 and 3. That will require substantial publicity through unions and social media. I hope the Government will support that process and that the Minister might be able to advise the House of the Government’s intentions to make sure the publicity reaches those who will benefit from it.
Like other speakers, I am absolutely delighted to give our support to the Bill. I wish it full speed through all its stages in this House.
Baroness Deech (CB)
My Lords, there cannot be anyone in this House who has not been affected by, and thought about, tipping. We all face the question of how much, and whether an amount added automatically can be removed without embarrassment. On many occasions, we wonder about the etiquette of tipping or not tipping. I had thought that it was less likely that many of us had been on the receiving end, except when we were younger. But, having listened to the noble Lord, Lord Mitchell, I will never again not think of how a young person to whom I am giving a tip might in fact be a future Peer.
Nevertheless, there are both detailed and broad questions that can be raised. The insertions that Sections 27D and 27F made into the Employment Rights Act have fairness as their theme. It is not defined. How can it be applied, or how can issues between employees and tronc operators be handled when the troncs are operated independently of the employer? The tronc system also means that, if a customer really wants to reward a particular employee, the tip may still go into a pool if that is how the tronc system is set up. Where tronc systems exist, there is little incentive for employers to offer much beyond the legal minimum wage levels. The more they pay, the higher the national insurance and other wage-related costs mount, which does not apply to tips, and, if the employer pays more, he or she will still remain obliged to distribute the tip income.
Proposed new Section 27G requires a tip to be paid out by the end of the month following its payment by the customer. But there is no definition of what is meant by paid. Charges in hotels may be accumulated during the stay: for example, the tip might be added at the time of the meal, but payment by the customer might be added long after. Payment might be delayed or even never received, or the charge in question to which a tip was added at a particular time might have to be reversed or reduced later due to error or disputes.
While the Bill rightly calls for information to be supplied to the employee, it could be argued that best practice means that explanation of the treatment of tips and service charges should be included for the customer on menus and tariffs. Given the lack of uniform standards, and the variety of systems and technicalities involved, it would be difficult to explain these in simple terms, let alone ones for which there is room on a menu.
Let me range to a broader level. Will this legislation serve only to cement out-of-date pay practices that will serve to inhibit the hospitality industry’s recruitment efforts? Pricing and employment practices in that industry need to be brought into line with best practice. Instead of relying on tips, employers need to be able to set salaries that offer fair and competitive levels of pay and provide prospects for promotion, bonuses and recognition of long service. The employee needs to know exactly how much they will be earning and ensure that they benefit fully from pension and other pay-related benefits such as holiday and sickness pay. Those pay-related benefits should relate to their total earnings. Those full earnings should be liable for tax. Employees and employers affected by tips should be subject to the same tax and national insurance contributions as any other business. They are not now, because of the special arrangements affecting tips. Ideally, all prices quoted by service and hospitality businesses should be fully inclusive, with no additions expected. Customers would be relieved and grateful.
In sum, the Bill as it stands needs more definition, which may yet be found in the guidance to be issued. But, overall, it is backward-looking rather than forward-looking, and many of us wish that there could be some end or curtailment to the system of tips. Will the Minister tell the House why it was thought necessary to set in stone schemes that could be said to be out of date?
Lord Bourne of Aberystwyth (Con)
My Lords, it is a great pleasure to follow the noble Baroness, who spoke with her customary lucidity and insight on some legal points, which I may also address.
I congratulate my noble friend Lord Robathan, in presenting the case so powerfully and with such clarity, and my honourable friends in the other place, the honourable Members for Watford and Ynys Môn.
I will come to the point made by the noble Lord, Lord Browne of Ladyton. I very much agree about the great length of discussions, consultations and abortive legislation that we have had on this issue. We need to address this.
The measure is simple and straightforward. There are some profound legal issues, and indeed some cultural issues, which the noble Baroness, Lady Deech, touched on. I share some concerns that she has addressed about how the practice of tipping has come to be seen as a substitute for wages in some cases. It is growing more extensive: I am told that, when you buy a sandwich in some delicatessens, you are invited to make a tip to the person in the shop making it for you. This is not an attractive practice. What happens in Singapore, for example, where people just do not tip, has its attractions: then, the wage reflects the job that is done.
However, we are where we are. I strongly support this measure, because I do not think that we will get to that position in the short term, and we need something that is fair to employees, as my noble friend said. The current system is not. Only in cases where there has been much adverse publicity have some notable restaurant chains, such as Pizza Express, altered their practice. They used to deduct a portion of the tip made on a credit or debit card payment and retain it. That is clearly unfair. I do not think that it happens so much with cash payments made to employees: that would be contrary to Section 1 of the Theft Act, and I do not think it necessarily happens. But during the pandemic, we have seen more people paying their bills by credit or debit card: it is clearly the norm.
The Bill is attractive because it will end that, and I have just one or two questions. It is attractive not least because now when we go into restaurants we will not have to ask the employee, “Are you getting the tip?” I asked this question last night, and I am pleased to say that they were. Every time you go to a restaurant, you feel obliged to ensure that the tip is going to the employee. Clearly, in many cases, it is. I do not want to suggest that all restaurants and hospitality outlets are unfair. They are not: I think the great mass are now passing it on. But this will rectify the practice.
I have a concern about publicity. We need to ensure that there is publicity behind this legislation, so that not just employees but members of the public—bearing in mind that, in this context, many members of the public will be coming from overseas—are aware of the practice, so that they can reflect that in how they give the tip and be assured that it is going to the employee.
There is a case about the tronc system, which the noble Baroness, Lady Deech, referred to. When somebody leaves a tip, they may want it to go to just the individual who is serving them. On the other hand, a tronc system will mean, in practice, that some of that goes to the kitchen staff and those behind the scenes. I would personally want to do that, but not everybody does. This needs to be dealt with in separate legislation. This piece of legislation should go forward: it has taken too long already.
This brings me back to the point made by the noble Lord, Lord Browne. I wanted to address this in speaking briefly today. We need to look at a situation where something that has virtually universal support takes at least eight years—admittedly, some of that when the pandemic slowed things down a bit—to get to the statute book. It is crazy. Something that is divisive, in the sense that it divides opinion, would get to the statute book much more quickly. Can the Minister take this back to his department and push for the issue to be taken further elsewhere? Where there is virtually universal agreement on something, can we not have a fast-track system to ensure that it gets to the statute book? Listening today—and I am sure it was the same in the other place—nobody really objects to the Bill in fundamental terms, and it would be very desirable if we could find a way of fast-tracking it, perhaps from this House, where we are more used to working across the aisle.
With that, I once more congratulate my noble friend on what he has done in ensuring that this is the focus, that there is unity here and that we are able to pass this legislation.
Baroness Chapman of Darlington (Lab)
My Lords, it is a real pleasure to contribute to this debate and to follow very well-informed contributions, based on experience. I pay tribute to the noble Lord, Lord Robathan, for introducing the Bill, to my noble friend Lord Browne—I do not think I have ever heard him make such a positive speech on any topic—and to the noble Baroness, Lady Berridge, who made some interesting points. The questions of the noble Lord, Lord Mitchell, on agency staff and credit card charges are obviously very important. I do feel for the Minister: he thinks he is going to be introducing something universally popular and we are all going to say, “Well done”, and he ends up with a bunch of technical questions; but that is us doing our job. The points made by the noble Baroness, Lady Deech, about the culture of tipping were very interesting and not something I had thought about before today. I thank her for that, and we must simply see this as a step in the right direction, not the destination. The points about information for customers, so that they know what is happening to the payments they are making, were very important. The awkwardness for the employee when asked if they will get the tip—referred to by the noble Lord, Lord Bourne—which forces them to decide between being honest and undermining their employer, is a difficult situation, even though we as customers are asking with the very best of intentions. That is something we have all encountered.
The Labour Party has obviously been supportive of this direction of travel for a very long time. There is a great deal of overlap between the position of these Benches and the measures in the Bill. We think that all tips, service charges and gratuities should go to workers in full, and that employers must not charge processing fees. The Bill’s provisions cover agency staff, which is good, and give workers the right to ask for records and recourse, which is vital. I thank the trade union Unite, which has for years been raising and campaigning on this issue. Alongside this, we are committed to bringing in a mechanism for collective grievances at work which would enable employees to bring a grievance against their employer to ACAS, as a collective. We believe that this would help to enforce fair tips more strongly.
It is useful to outline where we are as a party, where that overlaps with the Bill and what to do when we think things are not working correctly. As was indicated in the debate, how we advertise and ensure that all employers are aware of this change in law is very important, as is how it will be enforced and how staff can raise problems in the confidence that doing so will not be detrimental to them. There should be no deductions, including processing charges, apart from statutory taxes. The written policy on how tips are allocated needs to be made clear to staff when they start employment, and employers should ensure that all tips are allocated fairly through a TRONC who is genuinely independent of the business. For larger business, it should be stipulated that the TRONC should not be chosen from senior management personnel and should have the genuine consent of the workforce. Obviously, smaller business would not be subject to that, as it would not be practical. This should be underpinned by a statutory code of practice, be extended to agency workers and enforced by employment tribunals through ACAS. We would also reform and update the HMRC E24 guidance to simplify it, ensure it reflects updated requirements and make it easier to understand.
This is a welcome Bill. It may not deal with absolutely everything on this topic, but when the Government do something sensible, we should acknowledge that—perhaps balloons, a carnival or lighting some candles might also be appropriate. After the week I have had with the Retained EU Law (Revocation and Reform) Bill, it is a pleasure to welcome this, and I look forward to the Minister’s response.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
I thank the noble Baroness, Lady Chapman, very much indeed—she could always give me a tip for the work we are doing today, but I do not expect one. I pay tribute to my noble friend Lord Robathan for bringing this Bill forward, and I also make special mention of Dean Russell, the honourable Member for Watford, for the tireless work he engaged in to make sure that after a long period, this very important matter is now placed before this House.
It comes down to a simple matter of fairness. As customers, we were all surprised by this, and I was certainly surprised to discover that the tip I gave when I went to get my family pizza was not going to the staff—the people in the restaurant who were expecting it, and whom I was expecting to pay. For me, this is as much a matter of accurate description, to ensure that what people are saying is happening actually is. At the end of the day, this Government are committed to fairness and ensuring that employees get the right rewards that it is expected they will receive. I am delighted to take this Bill forward today.
I will go through some of the points that were raised. I covered the point made by the noble Lord, Lord Browne, in that now absolutely is the time. Looking back over the last few years, we were disturbed by the Covid crisis, but the initial voluntary scheme simply did not work, which was a pity. In my experience, the majority of restaurateurs are good, honest hardworking people, and it is important to highlight that running a restaurant is not a straightforward business, particularly for small restaurants. Restaurants and pubs are important to our community, and it is important that we support them and do not impose onerous legislation on them. But unfortunately, because the voluntary code of practice was not a success—and that had to be borne out in time—we were obliged to go into a consultation, and here we are. There is no looking back from this point, but it has taken a while for good reason.
Regarding the contribution of the noble Lord, Lord Mitchell, I do not know whether Your Father’s Moustache is still in existence, but it sounds like he was earning more then—adjusted for inflation—than he might be being paid to attend the House today. I must therefore question his business acumen, quite apart from his patriotism.
I will cover some of the important points that have been raised, first, on agency workers. At the core of the Bill, the honourable Member for Watford and other officials have been trying to work out how to make this fair. It is considered in principle fair to pay temporary staff in a place of hospitality for the work they do. It would seem appropriate that, if someone works for a period in a restaurant or pub, they be rewarded with a share of the tips, commensurate with their input. Having said that, there have been comments—such as those of the noble Lord, Lord Mitchell—about additional pay for agency workers as opposed to full-time workers, who may be more committed to an establishment. This matter will be covered in the consultation and will be included in the guidance issued by the Secretary of State, which will eventually appear in the code of practice. It is not necessarily straightforward, and it is important that practices already in place in establishments passing on the full quantity of tips be able to continue. I believe that they will be able to continue with smoothing out the fairness between agency workers paid at different rates and full-time staff who are paid at potentially lower rates for their full commitment to the establishment. This is a principles-based activity, based on what is fair, and the system should be designed to ensure a smoothing out of that, but it is certainly worth raising.
The Bill is quite specific that credit card charges may not be passed on to the employee—to clarify, they may not be deducted. We feel that is important because it creates a level playing field for all employers in making sure that there is no discrimination. We found that under the voluntary code various different charges were being levied—the so-called administration charges—from 2% up to 10%. The reason we believe the voluntary code was not working is precisely that employers were starting to impose fixed-cost charges on tips that we felt were not right to go to the employee, so we have not allowed for credit card charges. There may be other charges that need to be considered in the consultation, but they will come out during that discussion. However, that is an important principle that has been laid out and made clear.
Multisite operations have been mentioned. That topic has arisen quite a lot in these discussions. We have sympathy regarding the complexities. Again, let us return to the principle of fairness and what is right. A lot of this will come out in the consultation and will be developed into the code of practice, but the principle here is that the unit itself—the restaurant or pub—is the economic entity that will allocate the tips to the individuals working in that place of employment. The Bill is designed specifically to ensure that that is the case. It is not designed to allow large corporations to pool tips and allocate them accordingly. We are trying to draw a line between the gratuity or pourboire given by the customer to the person who has been serving them and those around them. That is an important point of principle. I am sure this will be discussed in the consultation period, but I want to make it clear that currently it is specifically to ensure that a single site is the recipient of the tip process and then that is distributed accordingly.
The noble Lord, Lord Shipley, raised the importance of the consultation process, as did my noble friend Lord Bourne and the noble Baroness, Lady Chapman, and of ensuring that it is widely publicised. We do not necessarily have the resources in this instance to embark upon a highly expensive publicity campaign but actually I do not think that will be necessary. If any noble Lords in this House have been involved in this process, they will have been contacted by large numbers of restaurateurs and recipients of tips to ensure that their views are clearly heard. This is an emotive subject that commands a lot of popular appeal. We will make every effort to ensure that the consultation is widely held and that people are aware of the opportunities to contribute to the consultation process in order to effect a strong code of practice.
On the point about publicity and how to project an establishment’s tip policy to clients, it is clearly stated in the legislation that it has to be available to the employee on day one when they arrive, it has to be clearly stated, and it must be available for clients as soon as we have developed the code of practice so that they can see, if they wish, what the tip practice is. There is currently no specification to put an extended tip policy on the receipt or whatever—I think that might be rather cumbersome—but it should certainly be available to the client. More important than a technical description of how every dollar is allocated among the staff is the knowledge that we are putting in place today, thanks to the good work of my colleagues, a fair system where clients and customers who tip staff know that all that money is going to the deserving workforce who have created the environment and given the service that has been received.
The noble Baroness, Lady Deech, made a series of extremely thoughtful points. I too have enjoyed the concept of a troncmaster, which is a phrase that has only recently come into my vocabulary. That is a very practical way of delivering fairness among employees. In the work that I have done, I have been struck by how straightforward and sensible this system is, and we want to keep it sensible and straightforward. I emphasise that we are not trying to increase bureaucracy and burdens upon hard-working restaurateurs, innkeepers and pub owners. That is not what this is about. It is about fairness and making sure that the majority of restaurateurs who do the right thing are able to do so in a continuing fashion, and that the people who do not are made to.
The tronc system allows for an independent person, often someone associated with the restaurant—they might be its accountant or whatever, which is perfectly reasonable—to make sure that there is a fair allocation of tips. I understand that there are some troncmasters who franchise their operations so that there are multiple troncmasters, so there is a job there if the $60-a-day tip does not continue to come to the noble Lord, Lord Mitchell, in terms of making sure that there is a fair allocation. That seems to me to be an effective way of doing it. It was asked whether it was current and appropriate; we think so, and we have very much factored that into the legislation.
I do not want to go on too long but there was an important point about the monthly pay cycle. It is worth noting that in this House, when you go to one of the restaurants or eateries and you leave a gratuity, as I do—I hope I am known as a generous tipper—that money is accumulated over the year and then paid out in January to all the staff in the House of Lords. That includes the doorkeepers and the secretarial staff, though I am not sure whether it includes Hansard, the clerks and so on. The point is that this is more complicated than it seems. In the consultation we will work to ensure that fairness is the basis of this rather than procedure. The reason why we have the one-month payment cycle—that is, one month after money has been received—is to ensure that employers pay the staff on time for the work that they do when it comes to passing on tips from customers. That is absolutely right and it should be the core principle. Frankly, we should resist trying to find mechanisms and delays around that process, while at the same time understanding the importance of making sure that people who have systems that are fair can still operate, given the flexibility required.
I am grateful to my noble friend Lord Bourne for supporting a fast-track process. I do not think the House of Lords is necessarily known for its fast-track processes. I would not necessarily encourage any circumventing of our marvellous and ancient processes, but I agree that we should get on with it, and we are pleased to be doing so.
I thank the noble Baroness, Lady Chapman, for the comments that she made. I will say only that if she has a chance to engage with us, she will see that the code of practice will be detailed and there will be written policies. I do not believe we have suggested using ACAS as a process for managing organisations that do not pass tips on in full as they should; instead, it goes through the employment tribunal system. Whether that is run by ACAS I do not know, but we would certainly be delighted to engage on how the process should work. But we want to keep this quite light-touch. The last thing we want to see is employees having to go through complicated and cumbersome legal processes for something that should involve pretty immediate redress. If the noble Baroness has the opportunity to go through the legislation, she will see the detail that is there for relatively rapid redress processes.
To conclude, bringing forward these new regulations will protect millions of workers, among them many of the lowest paid across a wide variety of sectors, and give them an avenue to seek remedies. Consumers will rest assured that the tips they leave are going, as intended, to reward the good service and hard work of staff rather than lining the pockets of bosses. Additionally, those business that are already doing the right thing—passing on tips to workers in full without deductions—will be confident that they are not at risk of being undercut by their less reputable competitors, which is a very important point.
These new measures are backed by government evidence and analysis, with a full impact assessment of the measures having been published. Continued stakeholder engagement will ensure that we do not inadvertently disallow arrangements that are considered fair in some workplaces, as I have mentioned, meaning that we can continue to promote fairness for both businesses and their staff.
The Government are pleased to support these new measures and we are glad to see the level of support for them across the House. I have greatly appreciated that during today’s debate. All waiters and other restaurant staff will look to us, I hope, as a beacon of fairness as we bring this legislation into force. I look forward to continuing to work with my noble friend Lord Robathan to support the passage of the Bill.
Lord Robathan (Con)
My Lords, I apologise to Members present because I should have declared an interest at the beginning, although admittedly it is over half a century out of date. When I was at school, I did a bit of waiting, though not much, and I remember the joy that I had when someone left a £5 note—which was worth something in those days—on the table. My children, who are in their early 20s, have done a bit of waiting more recently. They got paid, of course, but they also got tips, and they were very happy with those.
I should warn my noble friend Lady Berridge and the noble Lord, Lord Mitchell, that there will most certainly be a great deal of resistance from our excellent waiting staff in the Peers’ Dining Room should they wish to take up their past careers in waiting, especially if the noble Lord can get as much tipping as he used to get in New York.
I thank my noble friend the Minister for signalling the Government’s continuing support for the Bill and for answering most of the questions.
I would like to refer to three points that were raised. First, the noble Lord, Lord Mitchell, raised the question of agency workers. We should be aware—I hope the code of practice will be—of being too prescriptive on how much an employer pays either his own staff or agency workers, because I do not think that is really up to us to determine.
Secondly, on credit cards, personally I have a rather ordinary little credit card. I did a bit of research and apparently the charges on that would be something over 1%. Of course, if you have a gold Amex card—I do not know whether anyone in this place does—I understand it goes as high as 3%. That is surely up to the person who has the gold card. All these credit card charges are already discounted by restaurants and other places. Those who already pay the whole service charge do not in general discount it and take money out for the credit card charges, which would probably be more complicated than it was worth.
Thirdly and finally, I agree with my noble friend Lord Bourne and the noble Lord, Lord Browne, that it is rather sad—I will put it no more strongly than that—how long it takes to get a very simple bit of legislation through Parliament.
I hope noble Lords on both sides can agree that this is an important, if small, piece of legislation which would ensure fairness and transparency for both workers and employers. This is an opportunity to increase consumer confidence, which we have all heard about, create a level playing field for businesses and help ensure that hard-working individuals—often, as has been pointed out, the lowest paid—get the money they have been given and deserve for their work.
Employment (Allocation of Tips) Bill
Monday 27th March 2023
(1 year, 8 months ago)
Lords ChamberRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text
Lord Robathan (Con)
My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.
Employment (Allocation of Tips) Bill
Friday 21st April 2023
(1 year, 7 months ago)
Lords ChamberRead Full debate Employment (Allocation of Tips) Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Lord Robathan (Con)
My Lords, this is a very simple Bill and the issue is one of fairness. I am very keen that there should be no extra and unnecessary regulation; the chances of extra bureaucracy are negligible. Similarly, we do not need to worry in any way about the likelihood of great costs, as they are also negligible.
Most businesses already allocate tips fairly to their staff, but, regrettably, a minority have not done so. That gives the staff, who are often among the least well-paid in the hospitality sector—waiters, for instance, and others, stretching beyond the hospitality sector, but in particular waiters—the opportunity to insist that they are given the service charge that many of us in restaurants pay whenever we go to a restaurant, so they get the tips rather than the money going to the profits of perhaps a big company. This does not happen that much but does happen a bit, and we need to make sure it does not happen at all. I beg to move that this Bill do now pass.
Baroness Blake of Leeds (Lab)
My Lords, I start by congratulating the noble Lord, Lord Robathan, on sponsoring this important Bill, as he has outlined. I also thank Virginia Crosbie, the Member for Parliament, for stepping in to take up the discussions in the other place. As has been said, this is indeed an important issue; the Bill will support some of the lowest-paid workers across the country, and I am pleased to recognise the cross-party support it has received during its passage.
I will also reflect the comments my noble friend Lady Chapman made at Second Reading. This is a very welcome Bill; it may not deal with absolutely everything on the topic, but when the Government are supporting a sensible agreement, we should acknowledge that. We do recognise that there are probably some more details that need to be ironed out to ensure that the intent of the Bill is carried forward. I also add my thanks to everyone, including officials, who has supported its passage in both Houses.
Baroness Walmsley (LD)
My Lords, I do not always find myself in agreement with the noble Lord, Lord Robathan, but in this case I give him three cheers. He is absolutely right: it has been totally unfair that people have not received the tips they should have. In the past, I have myself asked the question of whether the 10% was going to go to all the staff and, when told that it was not, I refused to pay it and left cash on the table for the waiter. That is one way of dealing with it. The Bill of the noble Lord, Lord Robathan, is another, and I congratulate him and support it.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, I thank my noble friend Lord Robathan for bringing the Employment (Allocation of Tips) Bill through the House. I agree with him on many things, and particularly on this. I also thank noble Lords from across the House, particularly the noble Baronesses, Lady Blake and Lady Chapman, who spoke in recent debates, for their valuable contributions on the Bill during its passage.
The Government are very pleased to support this important Bill, which deals with tips, gratuities and service charges, which I will subsequently refer to as “tips”. The measures in the Bill will protect millions of workers. We believe that tips should be passed on in full and without deduction to workers. Indeed, many across this House and across the country would regard that as common sense. Tips left by customers are intended to reward the hard work and excellent service of staff rather than topping up the revenue of businesses. The Government are therefore pleased to support the changes made through this legislation and to hear support for it across this House.
I will restate what these measures will do once legislative passage is secured, and what they will not do. Employers will be prevented from making any deductions when distributing tips to their employees, with the exception of those already required or permitted—for example, by tax law. Existing legislation already sets out how tips should be treated for the purposes of tax and national insurance, as the requirements differ depending on whether the payments are made by cash or card and on whether tips are paid directly to workers or are processed and distributed by the business or an independent tronc. No changes are proposed to these tax laws. The majority of businesses, those who already do the right thing in passing on tips in full to their employees, will be largely unaffected. The Bill will ensure a level playing field.
On the statutory code of practice on tipping, when considering the distribution of tips in their organisation, employers will be required to have regard to the statutory code of practice, which will promote fairness and transparency in relation to the distribution of qualifying tips that will include various example scenarios. Employment tribunals will also be required to have regard to the code of practice where relevant in the event that a worker takes a claim against their employer on the grounds of unfair or improper tipping policy or procedure.
We expect that these tipping measures and the code of practice will come into force about a year after Royal Assent is granted to the Bill. This will ensure time for adequate stakeholder input, including a full consultation period, before the final version is brought before both Houses of Parliament for approval. I stress that, from conversations we have had with the industry, it is important that the variabilities to ensure fairness are properly considered, so a proper consultation period is necessary and right.
To conclude, bringing forward this new law will protect millions of workers, among them many of the lowest paid, and give them an avenue to seek remedies. Consumers will be able to rest assured that the tips they leave are going, as intended, to reward the good service and hard work of staff, rather than boosting the revenues of businesses. Additionally, businesses that are already doing the right thing—passing on tips to workers in full without deduction—will be able to be confident that they are not at risk of being undercut by their less reputable competitors.
The Government are pleased to support these new measures and have been glad to see the level of support for them across both Houses during the passage of this Bill. The Government are committed to fairness and to providing opportunities for hard-working people, which is exactly why we are supporting multiple pieces of employment regulation, including this one, on tipping. Ultimately, this Bill is about granting fairness to service workers, who for too long have not had protection from bosses taking tips, and about making sure that customers’ intentions to recognise good service are met. I am personally very pleased to support these new rules. I again thank my noble friend Lord Robathan for his sponsorship of the Bill as it has moved through the House. I also thank my honourable friends Dean Russell and Virginia Crosbie for their sponsorship in the other place and their hard work in this area.
Lord Robathan (Con)
My Lords, it is nice not to be controversial for a change and to have the agreement of the Liberal Democrats. I thank the noble Baroness, Lady Walmsley—I am not sure if it is a compliment or not, but never mind. I am delighted that there is no opposition. It is a very straightforward Bill, the Government support it and I know of nobody who does not. I, too, thank the officials who have worked on this, the Minister, those who have supported it from the other side of the House and my honourable friends Dean Russell and Virginia Crosbie in the other place. Frankly, I do not have anything else to say, for a change. I beg to move that this Bill do now pass.
Royal Assent
Tuesday 2nd May 2023
(1 year, 6 months ago)
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