Hospitality Sector: Tipping

Catherine West Excerpts

Wednesday 7th March 2018 Westminster Hall

[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.

--- Later in debate ---

[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.