Hospitality Sector: Tipping

Chris Stephens Excerpts

Wednesday 7th March 2018 Westminster Hall

[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?

--- Later in debate ---

[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.

--- Later in debate ---

[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.