Employment (Allocation of Tips) Bill

Debate between David Johnston and Virginia Crosbie

3rd reading
Friday 20th January 2023 Commons Chamber

[Virginia Crosbie (Ynys Môn) (Con)]

I beg to move, That the Bill be now read a Third time.

I am glad that we have time to debate this important Bill. It has a simple message: to promote fairness and transparency to ensure that workers receive the tips that they earn. It will create a level playing field for businesses that are already passing on tips to workers fairly and transparently. It will create confidence for consumers, who will know that the full value of the tips that they give will go to the workers. I thank the Minister and the Government for supporting the Bill and I am delighted that it has Government and cross-party support on Third Reading.

I also thank the hon. Member for Watford (Dean Russell) for his work on the Bill; he has been instrumental in bringing this important legislation to the fore. The Bill would not be where it is today without his determination and hard work. When he asked whether I would take the Bill over from him, I was honoured. I have experienced first hand the importance of tips and, like many young people, I financed my sixth form and university studies by working in cafés and pubs.

My constituency is dependent on the hospitality and tourism sector, which is also one of the largest sectors in Wales. At a particularly difficult time, this is an opportunity to help and support those who work in the tourism and hospitality sector, which has one of the lowest hourly rates of pay. It is estimated that the Bill will benefit about 1 million workers in the sector with a financial benefit of about £200 a year. With the cost of living at the front of many people’s minds, the Bill will help those workers who are wrongly not receiving the money that they are due from the tips that they have earned. In sectors such as hospitality and beauty services, customers recognise and reward good service and hard work through tips, gratuities and service charges, which I will refer to collectively as tips.

The customer expects 100% of the tips that they leave to go to the workers. We already know that that is happening in most businesses, where tips are passed on to staff in full, but some unscrupulous employers exploit staff by retaining some or even all of the tips that workers earn. That goes against the assumption of the large majority of customers that 100% of the tips that they give will end up in the pockets of the workers.

[David Johnston (Wantage) (Con)]

My hon. Friend is absolutely right: customers expect 100% of tips to go to staff. Does she agree that people who work in hospitality will also make the assumption that any tips they get will be theirs, and that their wage, which may not be very high, will at least be supplemented by what they earn for their service?

[Virginia Crosbie]

My hon. Friend makes a very good point. People—particularly young people—who are looking for employment in the hospitality sector will look at it as a whole package when considering what it means for them and whether they will be able to earn enough. Tips are a vital part of their calculation when they are looking at taking such roles.

Workers expect the tips that have been given in recognition of their hard work and good customer service to be given to them in full. The Bill promotes fairness for workers by creating a legal obligation to pass on tips to workers, in full, with no deductions other than in very limited circumstances such as those required under law. It will provide protection across all sectors, but focuses on changing employment law to bring increased protection for workers in industries in which tipping is common. An additional benefit of this legislation is the increased confidence that consumers will have that the tips they choose to leave in recognition of good service will actually go to the workers for whom they are intended, and are not unfairly pocketed by bosses.

In determining how to allocate tips fairly, the employer must have regard to the relevant provisions of the upcoming statutory code of practice, which will set out principles of fairness and transparency relating to tips. That code of practice is necessary to describe—in more detail than a Bill can—the different circumstances that are likely to be “fair” and “unfair”. A number of examples will be provided to illustrate what fair tipping practices look like. Those examples are not included in the Bill, as that could limit flexibility for employers. To issue a code of practice, the Secretary of State must consult the Advisory, Conciliation and Arbitration Service, and publish a draft to allow stakeholders to make representations, before laying the draft before both Houses of Parliament for approval. The code of practice will be statutory and have legal effect, meaning that it can be introduced as evidence to employment tribunals considering whether an employer is in breach of the legislation.

There is one main theme running through the core of the Bill: the creation of a legal obligation on employers to pass on tips in full to workers. Giving workers 100% of tips means that there can be no deductions from tips by an employer other than in the limited circumstances required or permitted by other law, including tax law. Prohibited deductions include, but are not limited to, card transaction fees and administration costs. Some employers may use a tronc system to help with distributing tips. Under that system, which is mostly used in the hospitality sector, an employer delegates the collection, allocation and distribution of tips to a person or persons known as “troncmaster” or “tronc operator”. It is important that we retain flexibility for employers to choose how to distribute tips, as long as that distribution is fair.

Transparency is a crucial part of the Bill, and information plays a significant role. However the tips are allocated, the Bill provides workers with a new right to make a written request to access the relevant parts of their employer’s tipping records. That allows workers to seek redress if they are not being treated fairly by gathering evidence and bringing a claim to an employment tribunal where necessary. The Bill will be enforced by workers through the employment tribunal system, and provides employment tribunals with remedies for situations in which an employer has made deductions from tips or has not allocated tips in a fair and transparent way. Workers will be able to present to an employment tribunal complaints about an employer failing to comply with its obligations to allocate tips fairly or failing to do so in time. The Bill also allows agency workers to present complaints. The limitation period for such complaints is 12 months.

Workers’ rights to bring forward such claims are at the core of the Bill because employment rights need to be underpinned by effective enforcement. The tribunal can make a range of orders, including orders requiring the employers to revise any allocation of tips that they have made or to make a payment to a worker of up to £5,000 in compensation for consequential financial loss. That will help those workers who have not been fairly treated when tips have been distributed.

The Bill will have a limited impact on employers who already handle tips fairly and transparently. It is not expected that there will be significant change or cost to business in complying with the new rules. Employers will still have flexibility on how to design their tipping policies, how to maintain records, and how they communicate their policies to workers. In addition, when workers request information, employers will have a period of four weeks to fulfil that request.

I will conclude by giving a final overview of the Bill. It sets out the right that tips should go to the workers who earn them, and that those tips should be distributed both fairly and with transparency.