Hospitality Sector: Tipping

Andrew Griffiths Excerpts

Wednesday 7th March 2018 Westminster Hall

[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.

--- Later in debate ---

[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?