Hospitality Sector: Tipping

Debate between Bambos Charalambous and Darren Jones

Wednesday 7th March 2018 Westminster Hall

[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.