Employment (Allocation of Tips)

Justin Madders Excerpts

Tuesday 14th May 2024 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I thank the Minister for his introduction. Once again, I refer to my entry in the Register of Members’ Financial Interests. I also join the Minister in paying tribute to the hon. Members for Watford (Dean Russell) and for Ynys Môn (Virginia Crosbie) for their work on the private Member’s Bill that led to where we are today.

As the Minister outlined, we are finally here to debate the code of practice on fair and transparent distribution of tips, which is necessary to deliver the provisions of the Employment (Allocation of Tips) Act 2023. I say “finally” not just because it has taken a year since Royal Assent for a code to be agreed, but because it has been seven years since action was first promised on tips.

As far back as 2017, the Conservatives promised to ensure fair tips for hospitality workers. In that time, it is estimated that workers will have missed out on some £200 million a year in lost tips. That is over £1 billion taken from workers in some of the economy’s lowest paid jobs. It is a little disappointing to see that the Government have delayed the Act’s implementation from July until October 2024. By our calculations, this further delay will cost people in the hospitality sector another £50 million.

With that out of the way, I make it clear that we will not oppose the code. Action on tips is already long overdue, and we do not want to see it delayed any longer. We believe that these measures will have a positive impact on the lives of workers in the hospitality sector and other industries that frequently receive tips, but we also consider that there is room for improvement. I will refer to those specific issues in due course.

However, I start by referring to the Government’s consultation, which starkly set out why action is needed. The proportion of respondents who reported that they did not receive the tips to which they were entitled was very significant. Only half of those who completed the consultation reported that staff receive all the tips. Of course, this means that half the respondents to the consultation do not. Extrapolated across those working in the sector, around 1 million workers will benefit from this legislation. Of those reporting that staff do not receive all the tips, 21% reported that there was an administrative fee, another 13% said there were other deductions, and a staggering 11% reported that no tips were passed on at all. It is jarring that, in the face of such clear mistreatment of workers, there has been such a delay to get to this point. That the Government chose to delay the implementation of the Act after discovering the staggering statistics in the consultation rubs a little salt into the wound.

Some 73% of workers who responded to the consultation reported that their employer had not sought agreement on the allocation of tips, and 40% of employers consulted did not pass on tips to agency workers, in part or in total, which clearly needs to be addressed, and it will be by this legislation. These statistics may be a reason why we face another delay, because clearly a lot of businesses need to get up to speed in order to be compliant, which begs the question of why more has not been done before now.

Will the Minister outline the Government’s approach to working with businesses to ensure that they are aware of their obligations under the new laws? What steps will the Department take to ensure support in the areas where businesses raised concerns in the consultation, such as transparency and record keeping on tip allocation and distribution? I am particularly interested in how the Department plans to engage with small and medium-sized enterprises to ensure that they remain compliant with the law once it comes into effect. Workers will benefit only if employers are aware of and compliant with the law, so it would be welcome to hear the Government’s plans.

I draw the House’s attention to a couple of specific elements of the code. Paragraph 25, on employers consulting their workforce on the policy, seems pretty minimal in setting out what a good consultation looks like. If an individual makes an employment tribunal claim, does the Minister envisage there being any opportunity for there to be an examination of the quality of the consultation?

The very important point at paragraph 26 needs further clarification. It says that employers should review their allocation policy “on a regular basis”, but there is no indication of the timescale within which this should take place. Does the Minister have a view on what the timescale might be? We are dealing with a workforce who might change quite regularly.

That leads me to the question of enforcement. I repeat the old adage that people’s rights are only as strong as their ability to enforce them. The sector to which the Act predominantly applies is made up of workers in insecure, low-paid jobs that are generally in non-unionised workplaces. Staff turnover is high, meaning that many workers do not stay with the same employer, or even within the same industry, for long periods of time.

These factors will doubtless have an impact on workers’ ability to assert the rights afforded under the Act. Many may be entirely unaware of the stipulations of the Act. Even if they are aware of the stipulations, they might not always be aware of the ways in which they can enforce them. Particularly if the Government persist with their plan to reintroduce employment tribunal fees, it may well not be financially viable for people to assert their rights, as the fee for lodging a claim might well be more than a worker is seeking to claim back.

More fundamentally, a worker on a zero-hours contract or in another form of insecure work may fear that asserting their rights will be detrimental to their future chances of receiving work. For example, if a worker on a zero-hours contract is concerned that they have been underpaid the tips to which they are entitled and requests to view their tipping record, as is their right under the Act, their employer might consider this behaviour to be stirring the pot and choose to reduce the hours they give that worker, or possibly even to stop giving them work at all. A worker with less than two years’ service can be dismissed without cause and have no claim for unfair dismissal.

The legislation does not cater for people to claim that they have been unfairly dismissed for asserting their statutory rights under the Act. If that is the case, it is a huge oversight given that there is protection against unfair dismissal for asserting most other statutory rights. Will the Minister consider looking at this point again, as there is a real concern that, unless people have legal protection and confidence that the law is on their side, they may be reluctant to avail themselves of their rights.

In terms of the impact on the tribunal system, have the Government made an assessment of the propensity of those in the hospitality sector to take forward claims? Has modelling been done to judge the expected number of workers who will take forward tribunal claims?

It seems to me that the lack of proper protections will mean that the minority of bad employers will be able to continue operating with impunity, withholding the tips that their workers have rightfully earned. As a minimum, I would expect there to be some monitoring of the legislation’s effectiveness, perhaps through surveys or consultations. After all, paragraph 35 of the code states:

“An employer cannot be said to have met its obligation to handle tips fairly and transparently if individual workers are not aware of their entitlements in line with the tipping policy.”

If we are to have confidence that those words mean something, surely we need monitoring to ensure that the code is effective.

There are a couple of other issues that I would like to raise. First, on when a worker is entitled to receive their tips for a given month, the code makes reference to the provision that a tip must be paid by the end of the next month. There is a question about why tips are not passed over on the same schedule as most workers are paid.

Secondly, according to paragraph 13, tipping by app is judged to be out of scope of the legislation. Can the Minister confirm exactly what “tipping by app” means? I take it to be a form of digital tipping, akin to leaving cash, but we need some clarity. Will he outline what work the Department has done to identify the types of tipping practices that will be in scope? There is a concern that, although tipping by app might not be widespread now, it could be seen as a way to avoid obligations under the Act in certain circumstances, to prevent staff from getting the tips that were intended for them.

In summary, we welcome the fact that the Government have finally got to the stage of being able to implement this policy. Sadly, we will have to wait another five months for it to be implemented, but the changes set out today will have a positive impact on workers, who for too long have been losing money that was always intended for them. We will monitor the progress of this legislation closely and, if necessary, take further steps to ensure the good intentions behind this Act are delivered in full.