Employment (Allocation of Tips) Bill

Mary Robinson Excerpts

3rd reading
Friday 20th January 2023 Commons Chamber

[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.

[Mary Robinson (Cheadle) (Con)]

I am grateful to my hon. Friend for giving way as she nears the end of her speech. She has made a very powerful case on behalf of workers who have been missing out on their tips up until now. I am keen for people to know about this Bill—workers, and also people like us who will go into a restaurant or a place to eat or to have a drink and ask, “Will you keep the tips?” Those people need to know for sure that the worker will be able to keep the tip, so a media campaign to support the Bill would be really helpful.

[Virginia Crosbie]

My hon. Friend makes a fantastic suggestion: it is incumbent on all of us and the sector to communicate the existence of the Bill. We have the likes of Kate Nicholls at UKHospitality supporting us, and the support of the unions; so many people are right behind the Bill, supporting those workers who play a vital role in such an important sector, so we will be seeing it communicated. As my hon. Friend the Member for Watford has previously stated, these Friday sittings are very special, and it is important that people know that in this House there has been an opportunity for us to put in place legislation that stands up for the rights of the workers.

As we are all aware, the process of taking a private Member’s Bill through the House is a fragile one, and I am thankful to all Members for working together to make sure that this Bill reaches its final reading in this House before progressing to the Lords. I take this opportunity to thank the Government again for supporting the Bill, especially Ministers at the Department for Business, Energy and Industrial Strategy, and I am grateful for the support of Members of this House while it has been moving through its stages—Second Reading, Committee, and now finally Third Reading. I firmly believe that the Bill gives us all a great opportunity to bring about real change, which will have an impact on workers who receive tips across all of our constituencies.

--- Later in debate ---

[Mary Robinson (Cheadle) (Con)]

It is a pleasure to follow my hon. Friend the Member for Watford (Dean Russell), who has been such a pivotal architect of this Bill. I congratulate my hon. Friend the Member for Ynys Môn (Virginia Crosbie) on taking this Bill on and getting it to this stage, and on being such a powerful advocate for it and for the people who will benefit from it. I also wish to recognise the work of my hon. Friend the Member for Watford, who had originally introduced the Bill to the House; a lot of this work was done previously by him as well, and this really has been a great double act. I was pleased to support the Bill on Second Reading and through its Committee stage.

The Bill supports our Government’s commitment to ensuring fairness for workers by ensuring that tips are fairly distributed. Although many good employers ensure that staff receive their fair share of tips and are open about that sharing, we know that that is not always the case. As I have previously mentioned in the House, many constituents got in touch with me about this, reporting that they had as much as 15% of their tips removed from their pay packet. Often, they simply were not aware of how much was being taken away from their pay packet, because often customers leave a tip on a card. Whether customers leave a tip and how much they leave is determined in large part by the quality of service provided, and we want to be assured that these tips go to the person who provided that service. As has been said, this is not a part of their wage; it is an extra, a thank you, a recognition for the service. Many customers will not give a tip, or they will give a lower tip, if the service they get is not that great. People want to know that whatever they give goes to the person who has given them the service in the first place.

As has been mentioned, many people are concerned about how they go about leaving a tip; they wonder whether they should leave cash. When they have had a great meal or great service, is it better to give the person cash? We all rightly ask, “Will you get this in full?” Many people will just add the tip on to their card payment when the bill comes; this has become commonplace, and indeed I am astounded by how few people now carry cash around in their pockets. Many people are understandably distrustful whether a tip left by card will reach the intended employee in full. Indeed, my hon. Friend the Member for Watford noted on Second Reading that there is no guarantee that the person or team they gave it to will receive it. For employees, tips by card are less visible and they are difficult to track or claim.

That is the world we are in and so navigating it and making things work is part of our job. This Bill will put an end to these concerns, by amending the Employment Rights Act 1996 to place a legal obligation on employers to ensure not only that tips, gratuities and service charges are distributed to staff, but that that is done in full, without deductions, when these things are being distributed by the employer or via a tronc system. An interesting point was raised by my hon. Friend when he talked about the system by which these tips are distributed: what does that “12.5% service charge” really mean? Where is it going to go? Perhaps we should put into the minds of the hospitality industry the idea that they should set out whether they are running a tronc system and note, next to where the “12.5% service charge” is specified, “This will be distributed and given directly to the people who have provided the service to you today.”

As has been mentioned, we know that covid was a difficult time for the hospitality businesses, but many of them have bounced back well. Some in my constituency have even flourished. That is often in large part due to members of staff providing great service, combined with the loyalty of their customers. Tips help to show workers that their good service is valued and appreciated, and customers should be able to show this appreciation with confidence. Although we should not need a law that obliges employers to allocate all tips, gratuities and service charges without deductions, sadly it is very clear that we do.

We have not yet spoken in detail about the other areas where the Bill will apply, such as the beauty industry. This is often an overlooked area. We tend to talk about tips and tipping from the point of view of hospitality, restaurants, pubs and bars, but many people who work in nail bars and other venues are left tips. It is great to know that they will keep their tips, too. I encourage the Minister to back up the Bill with sound outreach for media coverage.

I welcome this Bill. I congratulate my hon. Friend the Member for Ynys Môn on moving Third Reading, as the Bill will make a welcome change. I hope and believe it will receive cross-party support.