Code of Practice on Fair and Transparent Distribution of Tips

Lord Addington Excerpts

Friday 24th May 2024 Lords Chamber

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, just so that everyone is clear about these measures, “tips” covers all tips, gratuities and service charges. The code of practice will give legal effect to standards in the allocation and distribution of tips and transparency surrounding the keeping of records and the retention of written tipping policies.

As I am sure all noble Lords are aware, an initial draft of the code was published in December and updated following a public consultation. I say, on behalf of the department, that we are extremely grateful for all those businesses, workers and other stakeholders who provided helpful responses to the consultation. All those responses have been carefully considered. It is important to stress that many thousands—the vast majority, in fact—of hospitality venues, bars and clubs behave extremely well with tips. It is a crucial component of encouraging people to work in the hospitality sector, which is what we absolutely need in this country.

There are, however, some who have not behaved appropriately, and this code will ensure that there is an appropriate framework around which they now must operate. Law-abiding, legitimate processes will also be properly codified. We have also published a response to the consultation, setting out in more detail the feedback that we have received and the changes that have been made.

I have some technical points in conclusion. The updated code was laid before Parliament on Monday 22 April, pursuant to Section 9 of the Employment (Allocation of Tips) Act 2023, and approved by the House of Commons on Tuesday 14 May. The code contains summaries of the key intentions of the Act. It details the scope of the measures and provides further information on the need to maintain fairness in the allocation and distribution of tips and the need to uphold transparency in the handling of tips.

It was not the Government’s intention that certain hospitality venues should re-engineer their tips process and describe them as “brand fees” or some other charge that could circumvent the principle that, when consumers believe that they are giving a gratuity to an individual member of staff, it goes to them rather than to the corporation that controls the venue. We have been in touch on some of the most high-profile cases and will continue to keep a close watch on them.

The code subsequently expands on how to resolve conflicts which arise between employers and workers, including impartial advice and assistance in resolving problems through ACAS and eventual escalation to an employment tribunal. Following approval by this House, the code of practice and the other remaining measures in the tipping Act will come into force on Tuesday 1 October, thus, I hope, cementing this Government’s reputation as a true friend to all waiters, waitresses and hospitality workers across this country. I beg to move—and keep the tip.

[Lord Addington (LD)]

My Lords, it is a pity that we have to do this, but it is good that we have done it. I am glad that it has happened.

[Lord Leong (Lab)]

My Lords, I thank the Minister for introducing this code of practice, and the noble Lord, Lord Addington, for his contribution.

How often do we find ourselves in this situation? It is the end of a busy week and we are sitting among friends and colleagues in a beautiful venue, talking about the usual things—politics, the weather, or how unusually this week those two things have combined to make the news. As things inevitably draw to a close, our little group is presented with a Bill, which, after a bit of haggling and discussion, we agree on. So then we come to the matter of tips—or, more specifically, the draft Code of Practice on Fair and Transparent Distribution of Tips.

The hourly rates of pay in hospitality jobs are rarely fantastic, especially before Labour’s national minimum wage, but they are often boosted considerably by tips. Although we do not have such a strong tipping culture as, say, the United States or many countries on the continent, tipping is nevertheless a considerable element of the hospitality economy. The prospect of tips encourages staff to provide a better service, and tips enable diners and drinkers to show their appreciation for the people serving them. Tips are symbolic of a very human connection: even when a meal may cost more than the student waiter may earn in a single shift, we see and acknowledge those who provide the service that makes our time enjoyable. There has always been an implicit understanding that, when we add a tip to the bill, our money will go to those doing the front-line work and often the lowest-paid jobs, on hourly, variable part-time wages.

Although essentially transactional, tips oil the wheels of the industry. However, as we move more and more to a cashless society and tips become electronic digits on a card machine instead of notes in a jar on the bar, the transaction moves further away from the human and there is a risk that this direct connection is lost. Good employers in the sector value their staff and know that, if their customers have a positive experience, they are more likely to return. Treating staff well and honouring the connection between customer and server that a tip represents are important in retaining good staff, but some restaurant owners, and many high street restaurants and bars, have begun to see tips as part of their income stream and not a payment to their employees.

Even before Covid, hospitality was a tough business, operating on the finest of margins. The pandemic, more people working from home and the cost of living crisis have had an enormous impact on the sector, especially the night-time economy. The temptation for owners not to pass on tips is understandable, but the people who deliver the service also face the challenges of rising costs and fewer shifts. Many will always be dependent on tips as a crucial part of their income. It is wrong for this to be denied them.