Employment (Allocation of Tips)

James Gray Excerpts

Tuesday 14th May 2024 Commons Chamber

[The Minister of State, Department for Business and Trade (Kevin Hollinrake)]

I beg to move,

That the draft Code of Practice on Fair and Transparent Distribution of Tips, which was laid before this House on 22 April, be approved.

The code of practice, which I will refer to as the code, will give legal effect to standards in the allocation and distribution of tips, gratuities and service charges, and transparency surrounding the keeping of records and the retention of written tipping policies. For brevity, I will refer to tips, gratuities and service charges as tips for the rest of today’s debate. Passage of this code will signal a landmark moment in our protection of workers’ rights. For the first time, the Government are ensuring cast-iron clarity about where tips are going once they have been paid, and setting a new standard for how tips should be treated.

[James Gray (North Wiltshire) (Con)]

The Minister said that, for brevity, he would consider tips, gratuities and service charges all to be tips, but surely service charges, which are a set charge against some practice or service, are quite different from tips, which are for fun or voluntary. Gratuities come somewhere between the two, do they not? Could he kindly enlarge on the definition of those three things?

[Kevin Hollinrake]

It is our position that they amount to the same thing. We know from customer behaviour that when a customer sees a service charge on their bill, they will usually not tip at that point because they believe that the service charge is a tip. We feel that that is in the same category, which is why we have categorised them together in this instance.

The Employment (Allocation of Tips) Act 2023 was a relatively simple piece of legislation, but one with an important purpose. Following the justified public examination a few years ago of the spectacle of some businesses retaining significant percentages of tips or even keeping them altogether, the Government committed to backing a private Member’s Bill on tipping. The law mandates that all qualifying tips must be passed on to the workers who earn them, rather than being retained by businesses, and it sets out that these tips must be allocated and distributed in a fair and transparent manner.

I reiterate my appreciation, which I set out at this Dispatch Box earlier this year, for the cross-party support that the primary legislation engendered, and for the positive and constructive tone in which all the parliamentary stages were conducted. I want to extend further thanks in particular to the original Bill’s sponsors, my hon. Friends the Members for Watford (Dean Russell) and for Ynys Môn (Virginia Crosbie), and subsequently Lord Robathan in the House of Lords. Today we are another step closer to bringing these important measures into effect.

It was remarked at the time that the detail was crucial, and we elaborated on that detail in December with the publication of the draft statutory code of practice on fair and transparent distribution of tips. I am grateful for the large volume and quality of the responses we received during the public consultation that followed. Everyone who provided feedback, whether via an online survey, through an email response or in a meeting with officials at my Department, should know that their views have been considered carefully. Responses have been used to amend and enhance the code, and will continue to inform the communications and support for businesses implementing these measures.

We were pleased to lay the updated code of practice before Parliament on Monday 22 April. The code was also published on gov.uk alongside a full Government response to the consultation, which provides more detail on the feedback received from businesses, workers and other stakeholders. I trust that right hon. and hon. Members have had, or will have, the opportunity to study the detail of the code in their own time, but I will briefly set out its provisions here today.

The code of practice contains summaries of the key intentions of the Act. The code sets out the scope of this legislation, emphasising that it covers all qualifying tips—that is, employer-received tips and worker-received tips over which an employer exerts control or significant influence. These measures apply to every sector and across England, Scotland and Wales. The code goes on to provide more detail on the need to maintain fairness in the allocation and distribution of tips. Rather than being prescriptive and potentially burdensome to employers, the code articulates key principles for employers to consider, protecting both the rights of workers and flexibility for a variety of approaches from businesses.

The code helps employers to engage in constructive and positive consultation with their workers, and helps to minimise the risk of discrimination, which may be indirect or unintentional, if due care is not taken. The code sets out that employers need to uphold transparency in the handling of tips. This includes keeping a written tipping policy that is clearly communicated to all affected workers. This requirement also includes retaining accurate tipping records to which workers have the right to request access. One thing to note is that this need to maintain a written tipping policy and make it available to workers does not apply to businesses that receive tips only on an occasional and exceptional basis.

Finally, the code expands on how to resolve conflicts that arise between employers and workers. While early and internal resolution of issues is preferable for all involved, workers may consult ACAS for impartial advice and assistance in resolving problems. The code informs workers about how an unresolved dispute may be escalated to an employment tribunal.

[James Gray]

I am listening to the Minister carefully. I am sorry that I am not as familiar with the original Act I should be, and I apologise if I ask a foolish question as a result. He mentioned a moment ago that the code of practice would not apply to industries in which tipping occurs only rarely. Will he expand on what those are? For example, if I tip a taxi driver, would it apply to that? Obviously not. If I tip a waiter in a restaurant because he has been particularly helpful to me, why should that be shared with other people in the restaurant? To what sort of industries would the code not apply?

[Kevin Hollinrake]

As I said earlier, that provision does not apply to an industry or organisation that receives tips on an occasional or exceptional basis. An example would be a Christmas box or a Christmas present for somebody, or an industry that is not used to getting those kinds of gifts. My hon. Friend talked about the taxi industry, which is an industry in which people regularly receive tips. He also talked about a situation where a customer gives a tip directly to a worker. That tip can be kept by the worker if it is given directly to that worker and is not in the control of the employer. That is the difference: a tip given directly to somebody in a restaurant or some other place can be kept by that individual. We would expect that to be set out in a policy at employer level.

I want to take this opportunity to place on the record the Government’s gratitude to ACAS and all those involved in the tribunal system for their continued diligence on tipping and many other matters of employment law. Overall, the Government are proud today to endorse the approval of this code of practice. Following approval by this House and by the House of Lords, the code and the other measures in the Act will come into force on Tuesday 1 October.

With this code of practice, the Government are righting a wrong, delivering a level playing field for businesses and continuing our proud record of standing up for and defending the rights of workers. I commend the statutory code of practice on fair and transparent distribution of tips to the House.

--- Later in debate ---

[Dean Russell (Watford) (Con)]

It is a proud moment for me to stand here today, because I brought in the private Member’s Bill behind this change and was able to get it over the line with the able effort and support of my hon. Friend the Member for Ynys Môn (Virginia Crosbie). It is a joyous day, because I am absolutely passionate about two things, fairness and Watford, and we have some fantastic hospitality locations in Watford. Our cafés and restaurants include Jamaica Blue, the Flourish bakery, the Beech House, the Tudor Arms, the Sun Postal sports club, the Badger pub, Rhubarb Café, Random Café, Cassio Lounge and so many more. I would love everyone here to visit as often as possible, because they would see delights that they would get nowhere else in the world.

I list all those locations because in each hospitality organisation, in each café and restaurant, there are not only people who run the business, but many staff who work in it. I was talking about the tips Bill way back when I originally tried to introduce it via a presentation Bill, which did not quite make it through. As I have a routine of never giving up, I managed to obtain a private Member’s Bill—that was through luck—and then got it through, very much with thanks to the Government. I especially thank the Minister who is on the Front Bench today, who is doing incredible work, and his team.

This measure was so important to me because I would go to meet these organisations and chat to staff, especially during the pandemic, and they were all consistent in their concerns about whether they would get to keep tips. A big shift took place at that time from people giving cash to somebody individually towards a world where cash is not so common. That is not necessarily a good place to be, but it is the way the world has moved. Far more people will now pay a tip on a credit card at the end of a meal or when they leave a café. Every one of us will have asked the same question when we have made that payment and given our tip, which is, “Will you get this?” My Bill will help to resolve that.

[James Gray]

I congratulate my hon. Friend on his superb effort in getting his Bill through, as it is a wonderful thing to have done. I support the principles behind it, but I am slightly puzzled by one aspect: should the restauranteur or bar owner not be charging the correct price for the service, without any tip or service charge having to be added on? Should he not be paying his workers a fair wage for the job they are doing, without any tips, service charge or other things added? Surely my hon. Friend’s Bill will set this in stone. I say that even though I do not like tips very much, as I would much rather pay a fair price to the restauranteur and to the person who works for them.

[Dean Russell]

My hon. Friend makes an incredibly important point, which gets to the heart of this: the fairness here is to not just the workers, but the businesses. Most businesses do the right thing and pay a decent salary. The Minister can correct me on this, but I believe that legislation taken through a while ago means that tips cannot form part of a salary. So businesses should be paying a decent wage. When some organisations do the wrong thing, what they are doing is anti-competitive; they are making profit off the backs of their workers by keeping their tips, and the businesses doing the right thing in giving 100% of the tips to the staff are less competitive. My approach is therefore far fairer to the majority of businesses that do the right thing, and to the workers. It is also far fairer to the customers, who thought that the money was going to the staff and did not realise that a percentage of it, or in some instances all of it, was being taken from them.

My Bill will ensure fairness—that is the key word we should all take from the Bill and from today’s debate. It will ensure that all tips, 100% of them, are paid to staff. Agency staff will be included in that; when I originally talked about this Bill, some had a concern about a two-tier system for workers. The Bill will also ensure that a policy is in place—a code of practice—so that businesses ensure that their staff know where they stand. Businesses will be able to be clear with everyone who works for them how the tipping practice will work; I will not go through the full list, as the Minister did an excellent job of listing it earlier.

This measure has been a journey. I mentioned my work on the Bill with my hon. Friend the Member for Ynys Môn, but, as with all journeys, I began this trek much earlier. In many ways, this began with the fantastic work done by my right hon. Friend the Member for Bromsgrove (Sir Sajid Javid) when he was a Secretary of State. He put in place the work enabling the Government to look at how we could make sure tipping was fair, so this measure is built on the shoulders of giants. I will not list them now, but many Members have been involved in making sure my Bill came to fruition. Many organisations were also involved, and I thank UKHospitality, especially Kate Nicholls, who has done a fantastic job; and the Night Time Industries Association, which has done brilliant work. Conservative Members do not often talk positively about unions, but the GMB has done fantastic work, and I should give another mention to ACAS. Lots of businesses, employers and employees have also really pushed for this to come to fruition.

I want to thank some current and former members of the Government, particularly my hon. Friend the Member for Sutton and Cheam (Paul Scully), who was incredibly supportive when I originally tried to bring my legislation in as a presentation Bill. At the time, we were going to make it part of the Employment Bill. Unfortunately, that did not happen, but many of the policies that were going to be included did happen through various other routes. I thank my hon. Friend the Member for Loughborough (Jane Hunt), who was a fantastic supporter and an able Minister.

Of course, I also thank the Minister before us today and his team. He has been excellent in making sure that this is pushed forward and, through him, I would like to thank his team. Some of them were my team in my short time as a Minister, so I know the passion they had about making sure that we got this right. During my brief time as a Minister, I had to hand over this precious baby of mine, the tips Bill, to a colleague to make sure we could keep it moving forward through the House. That was when I was able to speak to my hon. Friend the Member for Ynys Môn, who has an incredibly important hospitality industry in her constituency. I could not think of someone more able and more energetic to make sure that we got the Bill through. Through her work and our work with Lord Robathan, we made sure that it got through and received Royal Assent. Many Members will not know that on the day it was given, I was fortunate enough to meet the King that morning in Parliament—I am sure that is a rare story and one for a pub quiz sometime in the future.

The other person I would like to give a huge thanks to is the lady who rarely gets a mention in here but who is behind so many of these incredibly important Bills: my hon. Friend the Member for Castle Point (Rebecca Harris). She does an incredible job in giving us guidance on how to navigate the complex system of getting a Bill through Parliament and in giving us confidence that it is possible. She has made sure that many Bills have got through and gone on this incredibly important journey, including many others in which I have had involvement in different ways, such as those on flexible working, maternity care, leave and so on.

My Bill will help about 2 million hospitality workers across the UK. That is an incredible number. When I have spoken about this to people around the House or to my constituents, I have found that so many more people will talk about its importance: customers who want to make sure that money for which they have worked hard and which they are giving as a thank you gets to the people they are giving it to; and colleagues who have family members who work as waiters or waitresses, or who work in bars, as this will make sure that they get the money that has been gifted to them. Many colleagues have spoken to me about their experiences of working in hospitality while at university or when they were younger. That has shown me how the hospitality sector plays an important role in our society: it provides a type of apprenticeship to many of us before our careers. We learn a lot about our culture, society and community, as well as about people, through hospitality. That is why I have been so passionate about saving our night-time economy, including music venues, in Watford and across the UK. Music venues have been at the heart of our society and I fear they may be damaged in the future, but I hope the Bill may play a small part in helping them.

The Bill is also about fairness. It is impossible to legislate for fairness in society—it is a gut feel—but fairness is at the heart of what it is to be British. We believe in fairness in all parts of our society. At its heart, the legislation goes back to the fact that when someone gives money as a gift to someone else, they expect them to get it. That is what this Bill will ensure, and I am grateful to the Government for that.

I want to raise a couple of related points with the Minister to ensure they are covered as the legislation moves forward. We need to ensure there is a communications strategy before October so that workers know their rights, how to access them and what is covered. Businesses also need to know that the legislation will not be a burden. During the early stages of the Bill, I was mindful that it must not be a burden and more red tape for businesses. The majority of businesses get that and understand it. Those that were doing the wrong thing will, no doubt, kick up a fuss. Over the coming weeks and months, we will probably hear about businesses trying to get around the regulations by forming new practices. I hope the Government will clamp down on those, and name and shame the businesses involved; I will certainly be happy to do that to ensure that fairness is the heart of the regulations.

The Government have a role to play in supporting the hospitality sector as a whole as best they can. Businesses in the sector are important parts of our communities; they are in the heart of every village, town and city. Hospitality is often the reason people visit an area, it is often the first port of call for a job and a career, and it plays an important role in entertainment and culture. No other industry has such an important and broad role, so I want to ensure it is fair. I thank the Government, the Minister and colleagues across the House who have been incredibly supportive, especially my hon. Friend the Member for Ynys Môn. Finally, may I say a huge thank you to my constituents in Watford? If they had not put me here, the Bill may not have been making progress today.

--- Later in debate ---

[Kevin Hollinrake]

That is a refrain that we constantly hear from the SNP. To be fair to the hon. Gentleman, he did refer to ensuring that we worked alongside hospitality on the guidance, but apart from that, there was nothing in his remarks about the needs of business, and the legislation is about the needs of business. The strikes that affected this country, particularly at the end of last year and in the year before last, cost the hospitality sector around £3 billion. That is why we legislated as we did, and we feel it was the right thing to do.

The hon. Gentleman would do well to reflect further on the needs of business as well as the needs of workers. We believe that there is a balance to be struck, and he has got that balance wrong in Scotland. Hon. Members need not listen to me; just look at the numbers. The most recent figures for economic growth in Scotland over the 10 years from 2011 to 2021 show Scotland’s cumulative GDP growth at 7.2%, England’s at 14.9% and the whole of the UK’s at 12.9%. SNP MPs would do better to go back to their nation and constituency and drive economic progress forward.

My hon. Friend the Member for Watford (Dean Russell), who has done such good work in this area, talks about fairness. I know he stands up for fairness, and for Watford; I have seen the amazing montages of all the times that he has mentioned Watford in this Chamber. He deserves plaudits for his work. He says that he was lucky, but as the great Gary Player said, the harder you work, the luckier you get. The success that my hon. Friend has been an instigator of today is due to his hard work and determination. He talks about what we have done on communications, working with employer groups, employee groups and the hospitality sector. Yes, we do that—we work with trade unions, ACAS, UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and others to ensure that the code of practice and the guidance that will follow will leave them fully cognisant of the requirements on the sector—a sector that is so important to our economy.

My hon. Friend the Member for North Wiltshire (James Gray) said he does not like giving tips. He is free not to give a tip if he does not feel it is appropriate, but most people would say that for good service, they would be prepared to provide a tip. The key point of this legislation is that that tip should be retained by the individuals who provided the service.

[James Gray]

May I correct the impression my hon. Friend has given of what I said? I did not say that I do not like giving tips. I like giving tips—I am quite a generous tipper, I think. However, I wish I did not have to. I wish people were paid enough to make tips unnecessary. That was the point I was making.

[Kevin Hollinrake]

My hon. Friend makes a very good point. Of course, we have increased the national minimum wage by record amounts this year to try to make sure that people get paid enough. It did surprise me to think that he would not be a generous tipper, because he has been generous in all my interactions with him.

Finally, my hon. Friend the Member for Ynys Môn (Virginia Crosbie) talked about her constituents and the benefits that the code will bring—£900,000 in her constituency, I think she said. She does a great job for her constituents. I must say that my daughters are both pretty pleased with the code as well, as they both work in local establishments.

When the code and other provisions on tipping come into force in October, we will right a wrong and ensure that tip money goes where it should: to the workers who provided the service. We will continue to monitor the operation of the code and the major industries that it covers, and we will not hesitate to amend it—with parliamentary approval, of course—if necessary. I can also confirm that additional, non-statutory guidance will be published before the code comes into force, to provide further background and help employers to remain compliant with the requirement. I commend the motion to the House.

Question put and agreed to.

Resolved,

That the draft Code of Practice on Fair and Transparent Distribution of Tips, which was laid before this House on 22 April, be approved.

Business of the House (Today)

Ordered,

That, at this day’s sitting, the Speaker shall put the Question necessary to dispose of proceedings on the Motion in the name of the Prime Minister relating to War Graves Week not later than 7.00pm or not later than three hours after their commencement, whichever is the later; proceedings on that Motion may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) and provisions of Standing Order No. 9(3) relating to motions that this House has considered a specified matter shall not apply.—(Mr Gagan Mohindra.)