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Darren Jones (Bristol North West) (Lab)
I beg to move,
That this House has considered the regulation of tipping practices in the hospitality sector.
It is a pleasure to serve under your chairmanship, Sir Roger.
A few months ago, a local newspaper in Bristol, the Bristol Post, exposed a tipping practice at a local chain of restaurants called Aqua Italia that involved managers levying a 3% charge on all table orders regardless of tips received. In practice, that meant that waiters and waitresses could, on occasion, be asked to go to the cashpoint after their shift to withdraw their own money to pay the levy to their employers, even if they did not have any tips themselves. Those funds were then recycled to help pay the wage bill—in essence, charging workers to work.
Amazingly, I am told that that is apparently legal—that is, if, in a reference period, such as a weekly pay period, the average hourly wage after deductions does not fall below the national minimum wage, it is legal, but if it does fall below the national minimum wage, it is not. That is because there are no useful laws on the regulation of tips in the hospitality sector or, as in the case of Aqua Italia, on charging workers to work. Enforcement can happen only if it is related to the national minimum wage. That seems an enormous loophole that should be closed, because this is an issue not only at Aqua Italia. As the BBC “Inside Out West” investigatory team found in its documentary, it has been happening at other restaurants too, including the national chain Turtle Bay, which has a restaurant in Bristol.
The offensive practice of charging workers to work and the exploitation of low-paid hospitality workers through an abuse of power in the use of tips is not new news. In 2015, it became clear that Turtle Bay—again—as well as Jamie’s Italian, Wahaca, Gaucho and Las Iguanas were taking the same approach with their staff, yet while many of them changed their policy in the face of public pressure at that time, to my knowledge Turtle Bay chose not to. The Bristol Post reports that Turtle Bay has franchised this policy to other restaurants it is involved with, such as Aqua Italia. The fact of the matter is that laws need to be in place, because even in the face of public pressure some restaurant owners decided to ignore it and carry on regardless.
Following those issues, the Cameron Government undertook a consultation on how to reform the regulations surrounding the use of tips in the hospitality sector. Three years on, to my knowledge, nothing has happened with that consultation or its output, even though hon. Friends such as my hon. Friend the Member for Walthamstow (Stella Creasy) have tabled amendments and had meetings with previous Ministers on the issue. The consultation sought to do two things: make it clear to customers what happens to the tips they give and ensure that staff get a fair share of those tips.
Some restaurants charge an administration fee on tips to cover the costs of the card transaction when someone tips with a card payment instead of cash. That sounds perfectly reasonable, but the administration fee can sometimes be as high as 16%, when the real cost of the transaction to the card payment company is somewhere between 0.2% and 0.9%. For workers who earn, on average, £7.71 an hour, that is again entirely unacceptable and an imbalance of power, given that waiting staff have no power to change it.
The question must be what Government should do about that. In my view, it is quite simple: the law should make it clear that workers get to keep 100% of their tips, and in circumstances where there are card payments to facilitate that tipping, the at-cost use of that machine could rightly be passed on, but at the cost the restaurant is charged, not at a higher cost so that the restaurant takes a further share of those waiters’ tips.
Bambos Charalambous (Enfield, Southgate) (Lab)
On that point, the percentage that appears on a bill in a restaurant is sometimes classified as a tip, not an administrative charge. I am not aware that that is regularly passed on to the staff who carry out the service. Does my hon. Friend agree that there needs to be greater clarity to ensure that the staff get the amount that is warranted for the service they provide?
Darren Jones
My hon. Friend is absolutely right. Going to the heart of the original consultation on this matter, there are two edges to that sword. One is that workers need to be getting the tips that customers feel are being given as tips, but the other is that customers need to understand what is happening with those tips. Often, when we pay bills in restaurants, that is in very small fine print and there is different use of language about administration charges and service charges. Some people do not know whether they are discretionary, and ultimately they do not know whether the tips go through to the staff who have provided them with an excellent service and whom they wish to tip. I hope the Government’s response today will pick up on some of those points from the consultation, and I look forward to hearing from the Minister on that point.
As with everything else, technology is changing the situation. One of my constituents in Bristol North West was recently in touch; she has started a company called Tip Tap, a mobile phone app that will allow diners to give their tips directly to the waiter. They can pay the bill to the restaurant, the waiter will get out their app and then they can pay the tip to the waiter directly. That seems an example of a good solution, but I still do not quite understand why restaurant owners and others feel it is a particular hassle to facilitate that process for their workers, who are often the lowest-paid in those businesses—as I say, on average, they earn only around £7.71 an hour.
This is a simplistic debate; I think waiters and waitresses should get 100% of their tips. If the Government disagree with me on that approach, I would welcome a commitment at the very least to revive the consultation from the ashes of the previous Parliament, respond to the submissions to that consultation and set out how they would seek to achieve those two objectives—customers to know where their tips are going and waiters and waitresses to get a fair share of those tips.
I hope that in seeking to achieve simplicity in regulation, processes, policies, technical solutions and billing systems, we could quickly move to the position that says, “But for passed-through at-cost administration charges, waiting staff get 100% of their tips.” That seems to me a simple solution that would close this legal loophole, where no laws exist today, so restaurateurs can get away with it by relying on national minimum wage law. It would stop the exploitation of low-paid workers in Bristol and right across the country. I look forward to hearing the Minister’s response.
Sir Roger Gale (in the Chair)
Before we proceed, I remind hon. Members that in a one-hour debate the Opposition Front-Bench spokesmen each have five minutes and the Minister has 10 minutes. Therefore, I shall call the winding-up speeches as close as I can get to 10 minutes past 5.
Justin Madders (Ellesmere Port and Neston) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Bristol North West (Darren Jones) on securing the debate.
The hospitality sector has traditionally employed significant numbers of young people who, it is clear to me, are being taken advantage of by unscrupulous employers who use legal loopholes to maximise their profit at employees’ expense. The world of tipping is governed by custom and, as we know from visits abroad, it can differ from country to country. Even here in the UK, there is no definitive guide on when we should tip and how much we should add to the bill. In restaurants, of course, that is pretty straightforward, but what if there is already a service charge added to the bill? What about gastropubs? I do not want to come over like Alan Partridge, but it can be a little bit complicated at times.
There is one constant among all this etiquette, which is that people expect, when they give a tip to the waiter, that the waiter will get the tip exactly as it has been handed over. It should not be used as a way to subsidise employees’ pay, which is the situation we are in today. My hon. Friend eloquently set out what has been going on at Aqua Italia. I think that is a situation most customers would probably find objectionable if it were drawn to their attention. It unfairly penalises workers for events that are outside their control. They are effectively at the mercy of the customer, and of course the more the customer spends, the more they need to recover in tips.
Alex Sobel (Leeds North West) (Lab/Co-op)
I thank my hon. Friend for an eloquent speech. Students in my constituency got in touch with me about the practice whereby, when customers leave without paying, their tips and wages are docked for those customers. Surely businesses should be taking that on, not penalising workers who are already low paid?
Justin Madders
My hon. Friend is absolutely right. That practice is common in petrol stations as well, when people drive off without paying. It is not something that should be visited on the employees, some of the lowest-paid people in our country. It is not right or fair that they should be penalised for something that is entirely out of their control. There are other things the employee cannot control: what if the customer has a complaint about the food, which has been prepared by someone else, and does not leave a tip? What if they have had to wait a long time before being seated? They might be in a bad mood anyway and just not feel like giving a tip.
Those are all vagaries that can affect whether a tip is given at all, but they should not be used to undermine the lawfully agreed pay rate, potentially breaching minimum wage regulations. I accept, as my hon. Friend the Member for Bristol North West said, that it is quite difficult to reach a calculation and know whether the regulations have been breached, but it is certainly possible.
I have heard it said that some employees can end up paying more to their employer in tips than they actually earn in wages for their shift. Does that not tell us something about how this system is completely out of kilter? Conversely, if they do not receive enough tips, they can have money physically taken from them, possibly taking their pay below the minimum wage—albeit maybe not across the whole reference period, but certainly for that particular day—which could leave them out of pocket altogether.
There are other challenges like that, in the hospitality sector in particular. The practice of cancelling shifts at short notice can also lead to people being out of pocket. What kind of country do we live in if somebody can pay for their childcare and their transport to work, only to get to work to be told that they are not needed and can go straight back home again? That is not acceptable.
The blunt truth is that this and many other arrangements in some areas of the hospitality industry are just a scam. They are a device to increase profits at the expense of workers. That is part of a wider problem in that this sector and others seem to treat workers, especially young people, as a disposable commodity. This industry has always involved a fair amount of casual work, but there are companies out there that seem to predicate their business model on exploiting their staff. I believe this is part of a wider trend, which has crept into our economy over the last few years, that work is now insecure and exploitative, and it is not the cornerstone it once was to enable people to build their lives.
That culture has led to an explosion of zero-hours contracts: it says that anybody wanting to become a nurse has to pay £9,000 a year for the privilege of working on the ward and allows an employer to pay less than the minimum wage by calling a job an apprenticeship. It is a culture in which the only way to get into some roles is to take an unpaid internship, which can last for months and have no guarantee of a job at the end. It is a culture that classes more and more jobs as self-employed, thereby avoiding a range of employment rights. It is a culture in which mass redundancies are met with a shrug by those with the power to do something about it.
Thangam Debbonaire (Bristol West) (Lab)
My hon. Friend is eloquently explaining some of the ways in which risk is being transferred from the most powerful in the equation to the least powerful. Does he agree that those are all specific examples of how big employers—and sometimes, unfortunately, small employers—can use all sorts of different methods to transfer the risk away from themselves while keeping the rewards?
Justin Madders
A whole industry has built up over recent years that involves the chipping away of what were once long-established principles in this country—part of the social contract of our society. It is prevalent in sectors in which collective bargaining is not prevalent, so I say to anyone in this industry or any other to join a trade union, because unions are their best chance of getting protection in the workplace.
We need to end the destructive combination of weak employment rights, greedy bosses and a complicit Government who are leading us in a race to the bottom—a race that will leave us all the poorer. If reports that up to half of all jobs will be lost to automation in the next decade are correct, we need a complete change in the way the Government view work.
We will have to undertake a massive, state-sponsored exercise to reskill our workforce and to develop a culture in this country that says education and redeployment will run through people’s lives. Three, four or five career changes will be the norm; at the moment, we see three, four or five job changes each year. There is no permanence. The state and employers should invest in individuals throughout their adult lives, reward effort with stability and let people have the confidence that they are getting a fair day’s pay for a fair day’s work.
There are many other ways an employer can take money out of their employees’ pockets or get them to work for free: uniform costs, cutting breaks or even stopping pay when the restaurant or bar shuts and expecting staff to work an extra hour or two to clean the establishment. Those are all different ruses and different ways of exploiting people. Expectations are so low, especially among the young, that people do not expect to be treated any better. It is time we offered a better vision and a bit of hope, so that people do not see this way of working as inevitable. I believe we can do better.
Catherine West (Hornsey and Wood Green) (Lab)
It is an honour to serve under your chairmanship, Sir Roger, and to follow my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders). I thank my hon. Friend the Member for Bristol North West (Darren Jones) for introducing the debate.
This issue first came to my attention when I attained my seat in the House in 2015. I was shocked to dine at one of the restaurants here and to find, when asking the staff whether they would receive my tip, that because I was paying that tip on a card, it would go straight to management. Following a write-up of that in the Evening Standard, there has been an improvement in practice. However, I understand from an update that I received from a waiter in the Palace that tips are now evenly distributed, but not until two months after the meal. Despite promises and commitments made by the House, some improvement seems to be required. I wonder whether the debate could be shared more widely than just in Westminster Hall.
Partly as a result of that furore, the then Business Secretary, who is now Secretary of State for Housing, Communities and Local Government, eventually set up a review of the issue. I was disappointed to read that we still await a proper Government response, despite the Minister then responsible replying to a parliamentary question in December 2017 that they would get around to it at some time. Is that not the case with just about everything we deal with, unless it starts with B, ends with T and has an X in the middle? We do not seem to get responses on much, which is a problem for people in the workplace who are desperate for fairness and to see a change in the situation.
The national minimum wage is now £7.71 an hour, but a cleaner in a local authority, for example, might get the London living wage of £10.20 an hour. That is a big difference. A lot of staff who wait on tables are really getting the rough end of the stick. We know from The Observer that, in one week, a restaurant called Las Iguanas took £34,000 from its servers across all its branches from a sales charge on servers. If that represents a typical week, over a year that would amount to £1.8 million. That was from a 3% sales charge, or 5.5% in London, which no longer exists at Las Iguanas. That shows that things can be changed and improved. It is often through these debates and coverage in newspapers and so on that we can advise the consumer on best practice. However, I understand that the 3% charge still applies at Turtle Bay, while a 2.3% charge still applies, as far as we know, at Gaucho.
There is a lot more to be done. I look forward to an energetic response from the Minister. I ask him please not to tell us that he is going to postpone the response to that review because we are too busy speaking about B, X and T. Could we please have a speedy response to the review, with energy injected into it? We look forward to his response.
Chris Stephens (Glasgow South West) (SNP)
It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Bristol North West (Darren Jones) on securing the debate.
The hon. Gentleman clearly highlighted a lack of basic protection in the workplace for those in the hospitality sector. Certainly, the only individuals providing that basic protection are in the trade union movement or organisations such as Better Than Zero, which operates in Scotland and is organised by the Scottish Trades Union Congress youth committee. It stands up against harassment in the workplace—there have been many complaints about workplace harassment in the hospitality sector—unpaid work trials and last-minute shift changes, and it exposes poor employment practices. Tipping practices in the hospitality sector are among those poor practices.
However, I have a wider concern: national minimum wage compliance, and those in the hospitality sector who try to use tips towards paying the national minimum wage rather than, as should be the case, tips being received over and above the national minimum wage. But what chance do workers have when the latest available figures show that 25% of the posts in the national minimum wage compliance unit are lying vacant? There are 399 members of staff in the unit and 83 vacancies, so although according to the National Audit Office 208,000 workers are being underpaid—not paid the statutory minimum wage—25% of the posts in the compliance unit lie vacant.
Catherine West
Has the hon. Gentleman made an estimate of the amount of taxation that is missing as a result of the failure to check on who is being paid the adequate amount and therefore the amount that is missing from the Exchequer?
Chris Stephens
I have not, but it seems to me that if 208,000 workers are not being paid the national minimum wage and 56,000 workers are in accruals, who have been owed the national minimum wage, and if we compare those figures with the 4,504 full-time equivalents chasing Department for Work and Pensions social security fraud, we see that more resources should be put into ensuring that the national minimum wage is complied with. I think that the Minister is anxious to intervene.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)
Let me enlighten the hon. Gentleman. The Government have actually doubled the amount of money that we are putting into enforcement of the national minimum wage. We have increased that to £25 million, and in the last 12 months we have helped to secure £1.2 million of wages owed to people who had been unfairly treated by their employers.
Chris Stephens
I thank the Minister for that clarification. However, the facts speak for themselves. Written answers from the Government only a few months ago have told me that the national minimum wage compliance unit has no plans to fill the current vacant posts. I am happy to provide the House of Commons Library with that answer.
The Minister says that there has been increased investment, but the 208,000 workers who are still waiting to be paid the national minimum wage may have a different view, so let me ask him what representations he is making to Her Majesty’s Revenue and Customs to enforce the national minimum wage appropriately in the hospitality sector and what representations he is making to ensure that HMRC is fully staffed and equipped for enforcement of the national minimum wage in that sector. The Low Pay Commission estimates that 1.9 million workers in the UK are currently on or just above national minimum wage rates. That figure is expected to increase, by the year 2020, to 3.4 million workers earning the national minimum wage or just above it, so we need strong action from the Government to enforce the national minimum wage.
On the issue of tipping and gratuities itself, as the hon. Members for Bristol North West and for Hornsey and Wood Green (Catherine West) have outlined, the Government need to get a grip on what credit card payments mean for the workforce—what that means for the worker in practice needs to be made clear to consumers and others. In my view, it is certainly a breach of consumer protection regulations if consumers are being told that tips from credit card payments are going to staff when they are not. I think that the hon. Member for Hornsey and Wood Green has identified such a practice, and I hope that it will be brought to the attention of the House of Commons Commission. It concerns me; I think that if there are facilities in this place where that is happening, hon. Members have a duty and responsibility to ensure that the House of Commons Commission is aware of those allegations and they are fully investigated.
Will the Minister advise us of the steps that he is taking to tighten the regulations in relation to customer credit card payments? I ask because it seems to me that that is a device to ensure that money is not going into workers’ pockets and that the so-called tips are actually an admin fee, as the hon. Member for Bristol North West outlined.
Thangam Debbonaire
The hon. Gentleman is making a very clear case. Does he agree that this issue is particularly pressing and urgent, given that nowadays so many people and, in particular, young people do not carry cash? If they are simply using chip and PIN or contactless, which an awful lot of people do, there is no alternative—and people do want to tip someone who has given good service.
Chris Stephens
I absolutely agree. As technology moves on in relation to payment methods, it is a matter of urgency that these practices are addressed and real action is taken. This can be interpreted not just as a consumer protection issue, but as an issue for the workers. The employer is in breach of the Employment Rights Act 1996 if there is evidence of tips not going to them.
I thank the hon. Member for Bristol North West for securing the debate. He gave some shocking examples of events in the city of Bristol. I fear that the practice is operating not only in the city of Bristol but elsewhere in the UK, because we have a Government who like to deregulate things.
Finally, can the Minister tell us what the outcomes were of the long consultation? I think that the hon. Member for Bristol North West said that it was three years ago. It seems to be buried somewhere. Can we see what the outcomes of that consultation were?
Laura Pidcock (North West Durham) (Lab)
I declare an interest as a member of Unite the union.
The practices at Bristol-based Aqua Italia, which have been so methodically exposed by my hon. Friend the Member for Bristol North West (Darren Jones)—I thank him very much for raising this important issue with the Government—and, of course, the Bristol Post are, sadly, part of a much bigger picture of exploitation in our low-pay economy. My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) outlined so eloquently the multitude of issues in the hospitality sector.
When I was a waitress and then when I worked in a pub, it was quite a regular practice for tips to be used to balance the till if it was under what it should have been at the end of the night. The worker would feel like a culprit because their tips were being used; they would feel that they were somehow being accused of defrauding their employer out of that money. But with thousands of transactions, there will be mistakes, and of course it was clearly very unfair to ask the workers to provide the money out of their hard-earned tips.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
My hon. Friend shares a very typical anecdote about something that many low-paid workers will experience; I speak as one whose first job was as a waiter in a well known Glasgow pizzeria. The typical practice was to be paid a pound under the minimum wage and then to have a tip allocated as a wage per hour to bring the person up to the minimum wage, so patrons of the restaurant were unknowingly contributing to subsidising the basic wage of the staff. I would often tell them that by giving us a tip, they were simply subsidising the employer to pay the wages. This practice is absolutely disgraceful, and that is why the work of people such as Better Than Zero is critical to addressing the massive inequalities that we see in employment.
Laura Pidcock
That is absolutely right. My hon. Friend gives a terrible but, I am sure, quite common example of what is happening in the hospitality sector. I implore everyone in that sector—and in all sectors, of course—to join a trade union, because only through a trade union can they have greater workplace rights. Also, consumers will become more aware and ask questions about what is happening to the tips when they are in an establishment.
What happened at Aqua Italia has been very well set out. Most striking was the case of the woman who had to go to a cashpoint at the end of her shift. How draconian is that? What century are we in when somebody has to pay just to be at work? Of course, the mantra of this Government is that for people to get themselves out of poverty, they must be in work. That is clearly a story to the contrary.
It is astonishing that this practice is legal, and it is more commonplace than people imagine. Although it remains within the law to treat people in such an extraordinarily exploitative way, it certainly cannot be said to be moral. The problem in the hospitality sector was and is the chronic lack of regulation, which has meant that exploitation—especially of young people, who perhaps are unaware of their rights and of the benefits of being in a trade union—has been allowed to flourish. That shows that we cannot rely simply on self-regulation in that sector.
Trade unions have taken a special interest in the sharp practices used in the hospitality sector since at least 2008. In May 2015, after it emerged that restaurants such as Pizza Express, Bill’s and Strada were taking tips and service charge payments intended for staff, Unite the union launched a summer campaign against these practices. For example, Pizza Express claimed an 8% so-called “admin fee” from any tips paid on a card. That is a huge problem, which has been repeated. There was public outcry as the endemic nature of the problem was displayed and publicised via social media. The huge public reaction forced the Government to act. They launched this call for evidence into tipping practices, followed by this consultation. However, as has been repeated consistently: nearly two years on from the consultation, what action has been taken?
In June, Unite campaigners handed a 6,500-signature petition to the Business Secretary, urging him to release the Government report into tips, but it still has not been published. The petition called on the Business Secretary to give staff 100% of their tips with complete control over how they are shared, to ban the bogus tronc schemes and make the code of best practice mandatory. For every single day that goes by, more abuses come to light. The so-called “pay to work” schemes are part of this broader set of practices, which cynically exploit restaurant workers and customers, who are none the wiser.
Catherine West
Whereas previously a waiting job was done for a few months or in the summer while someone was a student, these days, with the flat economy we are seeing, people are working in the waiting sector for several years as a full-time role. Does my hon. Friend agree that we now have to get to grips with the situation, get some energy into this and really address the poor practices?
Laura Pidcock
My hon. Friend is absolutely right. For many people this is not a stop-gap, but a career—they will work for many years in a restaurant, bar or pub.
Workers are charged fees, denied service charge payments, robbed of customers’ tips and denied tips by these bogus tronc schemes. A properly run tronc scheme— a pooling system, used by employers to distribute non-cash tips for employees—should be genuinely independent, free from employer interference and involve staff, but many are not. Too many say that they get absolutely no say in how the non-cash tips and service charges are shared out, or who gets a share. We have to remind ourselves all the time that it is not the business of the employer to say what happens to those tips. Those tips are hard-earned by the service of that member of staff.
Unite has also uncovered something very important. A number of these bogus tronc schemes, organised through troncmaster consultants—quite a dramatic name—have been used by companies to minimise the basic income of workers in order to avoid liabilities on national insurance and pensions. One case of this was an advert for a sous chef with a salary of £28,000. Once taken on, the employee found out that their contract stated a salary of £16,000, with the remaining £12,000 being paid from service charges. If anybody thinks that these practices are tailing off, I should say that two weeks ago we heard about the scandal at TGI Fridays, the American chain, following the proposal to redistribute card tips from waiters to kitchen staff, in lieu of an increase in wages.
Bogus tronc schemes are among a handful of ways in which tips are taken from the pockets of waiting staff and redistributed upwards and outwards into the pockets of companies, both big and small. Trade unions are rightly pointing out that these schemes verge on remuneration avoidance, illicitly reducing companies’ tax liabilities, and therefore should be subject to an investigation by HMRC.
Until staff are given 100% ownership rights over their hard-earned tips, with complete control over how they are shared out, bad employers will continue to take the tips of staff—that has been proved conclusively throughout our history—and young people will continue to live with that insecurity of low pay and not have the regularity of their tips. As the unions have been urging the Government for a decade now, it is time that the Government showed some leadership and dealt with these appalling, exploitative practices that exploit both the customer and the employee. Let us be honest: tips are often a lifeline for staff, but they often become a subsidy for low pay. People are dependent on these tips to live, not just for luxuries.
I am becoming somewhat tired of the Government’s inaction, already mentioned by hon. Members, in response to the low-pay economy. We do not need another review, consultation or any further consideration, but we do need a legislative imperative on employers to stop this theft from their staff. Actually, a whole new suite of workers’ rights is needed, placing collective bargaining, as has rightly been said, at the heart and centre of that agenda. The Taylor review and the Government response to it did not go far enough at all. In fact, the Government’s response to some of these complex issues in the modern labour market was extremely weak. I look forward to the Minister announcing that he will indeed take decisive action on this issue.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)
It is a delight to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Bristol North West (Darren Jones) on his well-made speech. I am genuinely pleased that he has raised these issues in the House and given me an opportunity to consider them and respond to him.
I think this is my seventh week as the Minister for small business, who is responsible for this employment legislation. In that time I have had the Carillion case, the Matthew Taylor report and various other pressing issues, but I am delighted that the hon. Gentleman takes this issue seriously. He raises important points on behalf of his constituents—many of whom, as he rightly points out, are vulnerable—and gives us the opportunity to debate this issue today.
Conservative Members care passionately about the lowest-paid in society, particularly those on the minimum wage and the national living wage, which, as you will know, Sir Roger, was introduced by the previous coalition Government. The Government are committed to creating an economy that works for everyone. The low-paid workers who work hard at our restaurants, bars and hotels across the country should be paid fairly by their employers. There are no excuses for not doing so.
I gently point out to hon. Members, however, that the hospitality industry is a reputable industry that provides fantastic employment opportunities for many of our constituencies across the country. I declare an interest as the previous chairman of the all-party parliamentary beer group. I am a lover of our pubs and hospitality industry. Only yesterday, I spoke at an event, which many hon. Members came to, about apprenticeships in the hospitality industry. They are giving young people careers with great training and great opportunities to earn well and have a fulfilling career in an exciting and dynamic industry. We should not tar all employers who are working hard to build their business and employ people in fulfilling and well-paid jobs with the same brush as disreputable employers.
Thangam Debbonaire
I am grateful to the Minister for giving way, but I feel that I must register that I have sat here for almost all of this debate and I have not heard a single person tar the industry with any sort of brush. All Members have done is to be very clear that where egregious employment actions do take place, they need to be rectified. I welcome the hospitality industry in my Bristol West constituency, but I just want employers to pay their workers properly. Most do, but some do not.
Andrew Griffiths
I am glad that the hon. Lady and I have found common ground on that point.
The Government are committed to creating an economy that works for everyone. That is why I was extremely concerned to learn from the hon. Member for Bristol North West about the working conditions experienced by some low-paid workers in the hospitality industry. I recall the period of scrutiny that the sector faced in the summer of 2015. Several of our largest restaurants were discovered to be abusing tips earned by their staff. I will clarify for the hon. Gentleman that I recognise the point he makes about the cost of transactions. He will also recognise that income tax is due on payments where the employer acts as the troncmaster—a fabulous word, which I had never heard before I started to prepare for this debate. There is a responsibility on the employer to deduct PAYE, and we must take into consideration the fact that that will result in some payroll costs. Where the employer facilitates the amounts, national insurance contributions are also due. Clearly, it is important that any employer acting as a troncmaster fulfils their legal obligations in relation to the payment of both income tax and national insurance contributions.
The cases raised today are of exactly the same type as the 2015 cases, which are the reason why we had the consultation. I thank the hon. Member for Ellesmere Port and Neston (Justin Madders) for his contribution, in which he raised important issues including the cancelling of shifts. That is a real problem. People turn up to do an evening’s work only to find that if the restaurant or pub is quiet, they are sent home without any further pay by their employer. They expected to do a four or five hour shift, but they may get paid for only one. I am delighted to tell the hon. Gentleman that, in response to the Matthew Taylor report, we are looking at exactly that: the asymmetry between the flexibility required of workers, particularly those on zero-hours contracts, and the employers that can send employees home at will.
Laura Pidcock
Was that a sneaky preview of policy that will be coming from the Government? Are they going to ban zero-hours contracts?
Andrew Griffiths
I point out to the hon. Lady that for many people who are employed on them, zero-hours contracts are exactly what they want. I recognise that is not the case for everybody, but all the consultations show that for many people zero-hours contracts provide the flexibility that they are looking for. That is not to say there may not be an argument for some sort of enhancement or bonus for those workers’ flexibility. That is why, following Matthew Taylor’s report, we asked the Low Pay Commission to look at whether those on zero-hours contracts who have to offer such flexibility should receive an enhancement on their wages as a repayment for it.
Chris Stephens
The Minister is, rather suspiciously, discussing much of the content of the Workers (Definition and Rights) Bill, such as shift changes and zero-hours contracts. He has promised me a meeting, but I do not yet have an invitation to see him to discuss these matters. When should I expect to receive an invitation?
Andrew Griffiths
I am sure that, as we speak, an invitation is winging its way through the ether to set that up. It is always a delight to talk to the hon. Gentleman, and I am keen to talk to him about his Bill. Perhaps this is the perfect point for me to address some of the issues that he raised in his thoughtful speech, particularly the enforcement of the national minimum wage laws.
The Government have doubled our investment in enforcement of the national minimum wage to £25.3 million a year. That means we have recruited an additional workforce, and around 400 people now work on the enforcement of the national minimum wage. Recruiting additional tax staff takes time, and new vacancies appear. We are committed to continuing the high level of staffing to support those who are being denied the national minimum wage or the national living wage that they are owed. I am delighted to say that last year we assisted 98,000 people in recovering the payments they were owed —up from 58,000 in the previous year—and I am sure the hon. Gentleman will welcome that.
Chris Stephens
I did say in my contribution that the minimum wage compliance unit hired 399 people. The Minister has just said that it hired 400, so I am glad that one person has been taken on. Seriously, though, does the Minister not share this concern, which many of us have? The National Audit Office says that 208,000 people are not being paid the minimum wage, but if it was not for the investment that he says the Government are making, that number could have been a lot higher—400,000 or 500,000 people.
Andrew Griffiths
I absolutely agree. I take that as the hon. Gentleman welcoming the doubling of the investment in the enforcement of the national minimum wage.
I know that everybody is keen to hear my response, but before I go on I will deal with one further point that the hon. Member for Ellesmere Port and Neston made, which was about unpaid interns. I absolutely agree that people being employed to do work under the auspices of unpaid internships is—let me be very clear—illegal. That is why in the past couple of months HMRC has written to firms that are advertising unpaid internships, reminding them of their obligations. This is no way to avoid paying the national minimum wage. If we find that firms are doing it, they will be prosecuted for non-payment of the national minimum wage.
Justin Madders
Does the Minister agree that as Members of Parliament it is up to us to set the standards and not to recruit people on unpaid internships ourselves?
Andrew Griffiths
I absolutely agree. That old phrase, “Physician, heal thyself” applies here. We should set the same standards ourselves. I would point out, Sir Roger, that I do not employ an unpaid intern.
The Government are clear that all workers should be paid fairly and at least the relevant national minimum wage. For those aged 25 and over, that is £7.50 per hour. I am pleased to say that the Government will increase that rate above inflation to £7.83 next month, which I am sure all hon. Members will welcome. In all, increases to the minimum wages will benefit more than 2 million workers. That is a well-earned pay rise for them from this Government. I thank all the businesses that have stepped up to the plate and are working hard to pay the national minimum wage. The Government respond robustly to employers that fail to pay their workers correctly. We have doubled our investment in enforcement, as I stated.
A worker aged 25 and above must be paid that £7.50 by their employer. All income earned through tips must be over and above that sum. Let me reassure the hon. Member for Glasgow North East (Mr Sweeney) that any income earned through tips must be over and above the national minimum wage. If any employee is not getting that, their employer is breaking the law. They should report it, and HMRC will take action to ensure that is enforced.
The hon. Member for Bristol North West raised restaurants charging a 3% table levy to their workers. That is a proportion of whatever sales are earned on the table that worker has served. It should not be seen as a route through the national minimum wage, because it is not.
It is my top priority to ensure that the lowest paid workers are fairly rewarded for their work and contribution to the economy. It simply is not right for employers to keep huge proportions of the tips earned by workers. Accordingly, in the past two years the Government have run a call for evidence, as we have heard, and a public consultation to examine this in greater depth. The exercise established a very clear principle that I think the House will agree with: a majority of stakeholders agree that tips belong to the worker. I would like to make it clear that this Government will act should there be clear, ongoing evidence. This debate has added to that ongoing evidence. The principle is that no employee should be abused in this way.
Laura Pidcock
I do not want to disrupt the Minister’s progress, but the trade unions have been saying this for a long, long time. It should not take a Westminster Hall debate to legitimise the argument or add to evidence. They have all the evidence the Government need.
Andrew Griffiths
As the hon. Lady will know, at the end of last year Unite the union, of which she has said she is a member, worked alongside the Association of Licensed Multiple Retailers to produce a new code of practice. That was a joint collaboration, and I pay tribute to both the industry and Unite the union for working in such a proactive way to develop a voluntary code of conduct. I also recognise that a voluntary code of conduct works only if everybody sticks to it. As we have heard, there are still companies that are not sticking to it.
The agreement between the unions and the ALMR about the principles that underpin good tipping practices is clear, and it provides great guidelines for how to distribute tips fairly among all workers, not just those at the front of house. We must remember that those working in the kitchen or cleaning tables are just as much a part of the service experience as those waiting on tables and interacting directly with diners, so I understand the need for the tronc system where tips are spread more widely among staff in some circumstances.
Since 2015, we have seen another change, which is that employers are noticing. Poor employers who misuse tips now face tough scrutiny—not only in Westminster, but under the harsh media spotlight. I am encouraged that newspapers raise the issue on a regular basis and highlight the points made by the hon. Member for Bristol North West.
Hon. Members asked when the Government would formally respond to the consultation on tipping. I have listened to the calls for further action from the Government; many would like to see an outright ban on employers making deductions from tips or levying table charges. It is an extremely serious issue, and the Government reserve the right to take action or to legislate if necessary. The evidence that we have heard clearly indicates that the Government need to look at it very closely and to take action if necessary.
Let me be clear: we are not ruling out legislating to solve the problem. Workers should be treated fairly, and I am clear that it is unfair for employers to pocket a huge proportion of the tips earned by staff. Furthermore, employers who play fair are disadvantaged compared with unscrupulous employers. It is a competitive market. We have heard the figures for how much unscrupulous restauranteurs and people in the industry can make as a result of that kind of scheme, which provides them with an unfair advantage in the marketplace among their competitors who are doing the right thing. I am very mindful of that, so we will remedy the situation if the industry does not act on the abuses that are sometimes reported.
Naturally, all options for Government action carry costs and benefits. It is important to get it right so any action is targeted and benefits the workers, while burdens on legitimate, well-meaning businesses are minimised. Employers should not be out of pocket, and I entirely accept that they may need to retain a small proportion of tips to cover the administrative cost of processing them, as I said earlier.
There are many examples of good employers who act entirely fairly about their staff’s tips and who recognise that treating workers fairly is part of running a productive and happy workplace. Ultimately, it is up to employers to make a compelling offer if they want to attract and retain the best staff.
I thank the hon. Member for Bristol North West for securing the debate and for the collaborative way in which he has raised these issues. I look forward to working with him on them in the weeks to come. It is right to call out abuses of tipping and the exploitation of workers in the hospitality sector, and more widely.
It is the responsibility of all employers to pay their staff fairly, and at least to pay them the national minimum wage. Hon. Members should be clear that if that is not happening, the Government will act if necessary. Our policy is that employers should not make unfair and unreasonable deductions from tips. We reserve the right to introduce further sanctions against employers who fail to comply with that basic principle of fairness.
Chris Stephens
On a point of order, Sir Roger. I wanted to wait until the Minister had finished, so I apologise to the hon. Member for Bristol North West (Darren Jones). Some allegations were made in relation to hospitality establishments in this place. Could you remind us of what action you or other hon. Members can take to raise that with the Commission?
Sir Roger Gale (in the Chair)
That is not a point of order for the Chair. The Minister has wound up his speech, but I think he indicated during his remarks that he would address that issue.
Darren Jones
I thank my hon. Friends and other hon. Members for their contributions to the debate. With respect, the Minister’s winding up speech was much like his Department’s consultation: it went on for quite some time but gave no answers. I am disappointed with that because I am a man of definitions, as I said in the main Chamber on Monday: I like answers that give clarity, so that I can pass that on to my constituents. The Minister used language like “If necessary we will act” and “We reserve the right to act”, but the comment of his that I will hook on to is the one about looking forward to working with me in the coming weeks. We have three years of evidence that legislation is required, and I intend to follow up in a matter of weeks to see how we can bring the issue to a conclusion.
As I said in my opening speech, we need clear laws so that workers can keep the tips they have earned and so that we no longer have to use the phrases “pay to work” and “tip tax”, because those practices will be illegal and therefore not relevant in the United Kingdom. The Minister will already have been invited, but I invite him again to join me and others in Committee Room 18 after the debate, where he can hear from workers who have been subjected to this exploitation, from the journalist who uncovered it, and from unions and representatives of the hospitality sector—who, I should add, agree with us.
I am disappointed by the lack of clarity in the Minister’s reply, but I look forward to more clarity in the coming weeks.
Question put and agreed to.
Resolved,
That this House has considered the regulation of tipping practices in the hospitality sector.