Employment (Allocation of Tips) Bill

Richard Fuller Excerpts

3rd reading
Friday 20th January 2023 Commons Chamber

[David Johnston]

I am grateful to my hon. Friend for his intervention. I was concerned that he was going to ask how much I leave in tips. Obviously, I am a very generous tipper.

[Richard Fuller (North East Bedfordshire) (Con)]

I am intrigued by my hon. Friend’s use of the word “generous.” In percentage terms, what does he consider to be a generous tip?

[David Johnston]

I am even more grateful to my hon. Friend for asking that question. I am probably not quite as generous as they are in the US, where a 25% or 30% tip is now sometimes recommended on the bill. I would always err on the side of giving a good tip, even for average service, and an even better tip for exceptional service.

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[Simon Baynes (Clwyd South) (Con)]

It is a pleasure to follow my hon. Friend the Member for Sedgefield (Paul Howell), and I, too, pay tribute to my fellow Welsh Conservative Member of Parliament, my hon. Friend the Member for Ynys Môn (Virginia Crosbie), and to my hon. Friend the Member for Watford (Dean Russell). As was mentioned during the previous debate, a huge amount of work goes into private Members’ Bills, but I know that both my colleagues are extremely hard-working and intelligent people, so it is no surprise to me that they produced this Bill in a timely fashion and in very good shape.

I grew up in the hospitality industry. My father ran Lake Vyrnwy hotel in Wales, which is only a few miles south of my constituency. Along with my brothers, I used to work for my father in the holidays, and I have just been trying to cast my mind back to the wage that we were paid. I think—and this is a measure of how old I am—that it was 20p an hour, which in those days was actually a very good rate for a teenager.

[Richard Fuller]

Was that old or new money?

[Simon Baynes]

Just in new money! It was 20p, not 20d.

That is why the hospitality industry is always of huge interest to me, not only in my life in general but, in particular, in my capacity as Member of Parliament for Clwyd South. My hon. Friend the Member for Wantage (David Johnston) said that this was not just about the hospitality industry, and I fully appreciate that, but hospitality is the key sector when we come to consider the Bill.

Clwyd South—like Ynys Môn—is an area full of tourism and hospitality businesses. Indeed, at exactly this time a week ago I was visiting Tyn Dwr Hall hotel, a wedding venue in my constituency just outside Llangollen, and talking to Tracey Owen, who runs the business and whose family own it. One of the points that came up in that discussion—and this, too, has been touched on by other Members today—was the vital importance of bringing young people into the hospitality industry. As I remember from my experience many years ago, hospitality is a wonderful training ground for young people, enabling them to learn a skill and also to learn some discipline in terms of turning up for work on time, doing a job properly and so on. Many hospitality businesses, of which Tyn Dwr Hall is a good example, go out of their way to bring in young people such as sixth-formers to do holiday work and learn a skill.

There are many other such businesses in my constituency, such as Iscoyd Park, another wedding venue; the Sun Trevor, a very popular pub; the Hand Hotel in Chirk, and, also in Chirk, Caffi Wylfa, a social enterprise-run café; The Hand at Llanarmon; The Boat at Erbistock; the Corn Mill in Llangollen; Gales Wine Bar, famously often frequented by a former Prime Minister, my right hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson), when he was the parliamentary candidate for Clwyd South back in 1997; and the Three Eagles, the Chainbridge hotel and the Wild Pheasant, all in Llangollen. There are many more I could mention, and it is probably invidious to pick out some and not speak of all, but those are just a few that spring to mind: they are businesses that I have visited and know well.

When I visited the Wild Pheasant, the staff made that point about recruiting young people into the industry. When Brexit brought changes to the employment market, it offered opportunities to people who might not previously have gone out to work at a young age in quite the way they are now, and also turbocharged those businesses to get out there, bring people in, train them up, and give them a good job. I think that that is an important background to the debate, because, as has been mentioned by many Members, it is the younger people who are often serving in hospitality businesses and are therefore the focus of the Bill.

Like my hon. Friend the Member for Wantage, I was pretty astonished that there are currently no laws directly concerning the distribution of tips as between employers and their workers. Tips and gratuities paid directly to the employer are presently the legal property of the employer, as are all service charges. It is worth repeating that, because it is pretty extraordinary. It makes the Bill all the more important.

Retention of tips is a very complicated issue. Like other hon. Members present, I would not say that there is a particular problem in my constituency, but my elder daughter has been working in hospitality in various places in London, having studied international hospitality management at university, and she says that the problem is rife in restaurants and so on. There is an idea that this is a limited problem, but that is probably not the case, which is another reason why the Bill is so important. The National Minimum Wage Regulations 1999 (Amendment) Regulations 2009 included a provision stating that tips could no longer be used to make up the national minimum wage, but they did not address the wider issue of unfair retention and distribution.

I strongly support the purpose of the Bill, which is

“to create a legal obligation on employers across sectors to allocate all tips, gratuities and service charges”

in the way that has been described. Another key point is how tips are distributed: the Bill intends

“to increase fairness for employers who already allocate all tips to workers by ensuring that all employers follow the same rules and by preventing a return to further unfair tipping practices in the future.”

Yes, we can hand tips to employees, but if we do not make distribution among employees fair, we will still not have fully solved the problem. Employers will therefore be required

“to have regard to a statutory code of practice…when complying with their obligation to allocate tips fairly.”

That is vital.

I note two other points from experts in the industry. Michael Kill, CEO of the Night Time Industries Association, has said:

“At a time when the hospitality industry is dealing with record vacancy levels, attracting people into work in hospitality businesses is already difficult enough. Taking tips off staff at a time when the cost of living is going up…the potential external economic pressures on our staff need to be considered.”

That is a fundamental point.

Kate Nicholls, chief executive of the industry body UKHospitality, is known to many Members of this House. She does a fantastic job as an ambassador for the hospitality industry. I pay tribute to her: during the covid pandemic, she did more than perhaps any other representative of the hospitality industry to bring its concerns to the Government, with fruitful results. She has urged the Government to work closely with businesses and employees to make the system work for all as venues face mounting costs:

“For hospitality businesses…customers tipping with a card incurs bank charges for the business, and many also employ external partners to ensure tips are fairly distributed among staff”.

That is an important balancing point that we need to consider.

As somebody who was born and bred in the hotel business, I have nothing but support for this tremendous Bill. I commend it to the House.

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[Richard Fuller (North East Bedfordshire) (Con)]

As is often the case on days such as this, one prepares an extensive speech only to then be given guidance that one should be brief. I shall therefore seek to rattle through a number of points relatively quickly and try to be as helpful as I can to the Minister.

I am interested in the explanatory notes. As you probably know, Mr Deputy Speaker, we had a public consultation in 2013, another consultation in 2016 and another response to the consultation in 2021, and now we are in 2023. Good Lord, eight years! Why has it taken so long? A number of colleagues have noted that there is no law on this issue, but paragraph 15 of the explanatory notes state:

“In terms of legal ownership: tips and gratuities which are paid directly to the employer…are presently the legal property of the employer.”

It goes on to say:

“Tips and gratuities which are paid in cash directly to a worker are the legal property of the worker”.

A number of MPs have mentioned the transition from cash to card. I am interested in the Minister’s view of the implications in terms of legal ownership and whether this Bill is of particular assistance.

I am interested that the impact assessment refers to the possibility for complaints to be made to the employment tribunal as a result of this legislation. Have the Minister or his team made an assessment of the likely impact? I would guess it is limited and perfunctory, but we know that employment tribunals are under a lot of pressure to get through pieces of work, so it would be helpful to dot the i’s and cross the t’s.

I am also interested in table 12, on page 26 of the impact assessment, which looks at the summary of costs by business size and provides central estimates. There is no greater champion in this House for small businesses than the Minister, so he will have noted the distribution of costs among micro, small, medium and large businesses as a result of complying with this measure. Rather than showing a nice, graduated increase in costs whereby the largest businesses take on the largest costs, the table shows that quite a lot of the cost falls on the very smallest businesses. I am interested in hearing the Minister’s thoughts on that.

I thank my hon. Friends the Members for Watford (Dean Russell) and for Ynys Môn (Virginia Crosbie) for proposing and supporting this Bill. I will end with some questions to the Minister directly about his approach to tips, on which he may wish to advise the House while speaking with his hand on the Dispatch Box. First, does the Minister tip or not? Secondly, how much does the Minister routinely tip? If someone else offers to pay for the meal, does the Minister offer to pay the tip?

[David Johnston]

Is my hon. Friend speaking from personal experience of the Minister?

[Richard Fuller]

Sadly, the Minister has never bought me a free lunch, but that is no disparagement of his character.

Does the Minister pay a tip if it is automatically applied to the bill? The other points are a little frivolous, but this is a serious point: if the automatic charge is a service charge, does the Minister pay a tip in addition? That is important because there is a lot of confusion about whether a service charge is a tip. I do not think it is, and I still do not know whether it is covered by this Bill. Has the Minister ever crossed out a service charge on a bill and not paid it? Does the Minister ever dare not to pay a tip? He might choose to give the Government’s response on all those matters rather than a personal one, but I wanted to get those questions on the record. In the interests of time, I will end my comments there.

[Fleur Anderson (Putney) (Lab)]

I congratulate the hon. Member for Ynys Môn (Virginia Crosbie) and the hon. Member for Watford (Dean Russell) on all their work on this Bill. It will make such a difference to so many people across the country, and I declare an interest, because it will make a difference for two of my older children who are working in and out of the hospitality industry and are very interested in the progress of the Bill.

The Bill is righting a wrong of many decades. When I was a waitress in a hotel, I had to drive home at the end of my shift. I was the most junior member of staff, and all the other staff lived in the hotel and would drink the tips at the end of every night, so I would not get any of those tips. I was not able to ask my employer for a written copy of the policy on tips, and I was not able to find out what my share of the tips would be. I have felt for quite a long time that that was an injustice, and I am glad that the Bill will right the many injustices that are happening on a daily basis across the country.

I support rewarding customer service and transparency and confidence for businesses, customers and employees alike. This is fairer for businesses that do the right thing. It is fairer for people who tip and expect it to go to the worker; as many Members have said, lots of things are not clear about that at the moment, and I hope it will be much clearer in future. It is also fairer for the employee, who will get the money that has been given by customers for the work they have done. Labour supports the Bill, and I am pleased to see that the Government are behind it as well. It also has the support of unions—especially the GMB, which has been campaigning on this for a long time—and UKHospitality.

Like other Members, I am surprised that there is no law on tips at the moment. However, as I said in the previous debate, this measure should have been in a comprehensive employment Bill, which has been promised time and again by Government. It is disgraceful that all this time, hospitality workers and workers in the beauty industry have been cheated out of their money. It is clear that some hospitality workers are not getting their tips, with companies instead using them to subsidise other workers’ wages, to pay for accidents such as unpaid customer bills or to pay for so-called administration costs that are very opaque. In 2015, evidence was found that two thirds of employers in hospitality were making deductions from staff tips, in some cases of 10%. With the pandemic and more people paying by card not cash, there are well-founded concerns that workers not receiving tips in full is becoming standard practice, so this law is very timely.

The Government have repeatedly promised to tackle this issue but failed to do so until now. They published a call for evidence in 2013, which showed broad support for action on fair tipping. They then promised this measure at the Conservative party conference in 2018 and in the 2019 Conservative party manifesto, and they committed to include it in the employment Bill in December 2019, but that was dropped from the last two Queen’s Speeches. In the meantime, the latest figures suggest that staff may have lost over £1 billion of tips while waiting for this legislation over the last five years.

Frontline workers in pubs, bars, cafés, restaurants, hairdressers and beauty salons are often the lowest paid. With the Tories’ cost of living crisis worsening by the week, every penny counts, and we desperately need this legislation. In 2020, members of Unite the union at the Ivy tried to lodge a collective grievance against their employer on a number of issues, including withholding tips, but with no formally legally backed process to take the complaint forward, this was dismissed.

I thank my hon. Friend the Member for Reading East (Matt Rodda) for his speech highlighting how important the Bill will be for so many of his constituents, especially for the hospitality sector and for students, and I agree with him. I am proud that it was a Labour Government who, in 2009, first intervened in this issue to make it illegal for tips to contribute to the national minimum wage, just as I am proud that, some years earlier, it was the Labour Government who introduced the national minimum wage itself.

[Richard Fuller]

The hon. Lady is right to congratulate the previous Labour Government on introducing the national minimum wage. Does she also agree that it is good news that the Low Pay Commission report has produced details showing that between 2019 and 2022, young people had the largest increase in wages? It was a 25% increase for 16 and 17-year-olds, compared with 11% for those over 23. Does she agree that that is very good news indeed?

[Fleur Anderson]

An increase in the national minimum wage is very good news. I remain proud that it was the Labour Government who first brought that in and did not drag their feet for years and years over it.

Back then, too many bad bosses were using tips, which should be a voluntary extra to top up basic pay, as has been underlined by so many Members today. Once again, Labour has been ahead of the curve on this issue. The shadow Secretary of State for the future of work, my good colleague and right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), committed last year to stamp out unfair tipping practices, including through many of the provisions included in this Bill; to ensure that all tips, gratuities and service charge payments are allocated to workers in full without deductions; and to ensure that a written policy is produced to make it clear to staff how all tips are allocated, and for those tips to be paid in full at the end of the month following the payment.

Labour will ensure that tips are allocated fairly through a tronc, which is genuinely independent of the business, and we will announce proposals to allow exploited workers to lodge any workplace grievances collectively—a right denied to many hospitality workers seeking the return of deducted tips. A Labour Government will deliver for working people, ending unjust deductions and ensuring that workers themselves decide how tips are distributed.

In conclusion, I have a few questions for the Minister. First, we have before us another Bill on workers’ rights, following the passage of the previous Bill on workers’ rights. If the Government are to introduce an employment Bill effectively through supporting piecemeal private Members’ Bill such as this, which parts of the original employment Bill are they going to drop?

Secondly, many workers end up on the end of already illegal practices while at work. Without stronger enforcement of standards, there is a real risk of Bills such as this failing to meet their potential. I thank the Minister for his earlier response about the consultation on a single enforcement body. Does he believe that such a body for workers’ rights would help to enhance people’s ability to get justice against unscrupulous employers?

Thirdly, measures to strengthen the rights of hospitality workers are welcome, but ONS statistics from May last year show that nearly 25% of workers in the food and accommodation sectors are on zero-hours contracts. Hospitality workers desperately need security and flexibility, so will the Minister commit today to banning these one-sided, unfair zero-hours contracts?

I close by congratulating the hon. Member for Ynys Môn on getting this Bill so far. It will have a massive impact. It has our support and I wish her the very best in the remaining stages.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

First, like the shadow Minister, let me declare my interest. I have two young daughters who work in the hospitality sector and who may benefit from this legislation. Happily, I am pleased to say that the Bill will also benefit around 1 million other people to the tune of £200 million per annum.

I thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie)—I hope I have pronounced her constituency correctly because we have had some problems with pronunciation this morning—for her very hard work in bringing the Bill forward to Third Reading. The Bill is about fairness, transparency and, again, our efforts to make this society a fairer one. I am pleased that she has taken on the sponsorship of the Bill. Obviously, I thank the previous sponsor, my hon. Friend the Member for Watford (Dean Russell), for his work on such an important piece of legislation and for his campaigning on this issue. This is not just about his work in taking the Bill forward, because he has been amazing in campaigning on this. I thank my predecessors —not just him, but my hon. Friends the Members for Sutton and Cheam (Paul Scully) and for Loughborough (Jane Hunt).

It has been brilliant to hear the support in the House for these measures, and I will briefly reiterate why the Government are supporting the Bill. A few years ago, stories were highlighted in the news about bosses wrongfully pocketing tips intended for their workers. Both the Government and the public were appalled by that; money left by customers who wanted to recognise the hard work and excellence of staff was in some cases simply treated as part of the revenue of the business. That is why my Department took action to understand the scale of the problem and launched consultations, as has been mentioned. We were then able to publish a full impact assessment to support the Bill. The Government believe that tips should go to the staff who earn them, rather than the business, and that businesses that withhold tips from staff are wrongfully benefiting from money intended for hard-working staff.

The Bill prevent therefore employers from making deductions when distributing tips, apart from those required or permitted by existing legislation, such as under tax law. That will ensure that all money left by customers is passed to workers in full, as intended. The Bill also establishes a requirement to allocate tips fairly between workers at a place of business. That protects vulnerable workers and prevents exploitation. As we have mentioned, a voluntary code of practice on tipping was published in 2009. Our evidence shows that voluntary guidance alone was not enough to stamp out bad practice. Therefore, this Bill goes a step further and requires employers to give consideration to a statutory code of practice when considering how tips should be distributed. The code will continue to be developed by the Government, in partnership with key stakeholders, and will be subject to a full consultation period before the final version is brought to this House for approval.

Let me address some specific points made by hon. Members in this debate. The hon. Member for Reading East (Matt Rodda) talked about the benefits to lower-income workers and to towns with lots of hospitality workers, such as Reading, and indeed places in Thirsk and Malton and many other constituencies represented here today. My hon. Friend the Member for Watford talked about snollygosters. I do not know whether that piece from Quentin Letts referenced my hon. Friend personally, but being mentioned in one of his articles is always a badge of honour, regardless of whether the comments are derogatory. My hon. Friend also said that this measure is about fairness and clarity, and the simple question when one is handing over a tip: “Do you get this?” He said this should not be about topping up salaries. I say that it should be about driving up service, as these tips are paid to people who do a good job. Let me answer the question put by my hon. Friend the Member for North East Bedfordshire (Richard Fuller) on my tipping policy shortly.

There are some burdens on businesses as a result of this measure, particularly on record keeping. We should bear that in mind when we legislate, but, on balance, I think this Bill is fair. My hon. Friend the Member for Cheadle (Mary Robinson) talked about fairness and about how most employers do the right thing but some do not. She also talked about the confusion regarding making cash or card payments, and what happens to such payments. This is not just about hospitality, as this applies to other industries, such as the beauty industry. I should point out that this Bill does not cover every sector; requirements in here about record keeping and the like, and the passing on of tips, apply only to businesses that receive tips on a more than exceptional or occasional basis. So this does not cover every instance; it applies just where tips are routinely paid.

My hon. Friend the Member for Wantage (David Johnston) talked about not just hospitality, but the key element of access to cash, on which the Government are undertaking another stream of work.

My hon. Friend the Member for North Devon (Selaine Saxby) talked about the fantastic hospitality venues that are essential to the economy in her area—as, indeed, they are to the economy in mine. She is a huge advocate for business. Many of us on the Government side of the House are for business because we are from business. I know that she is, and I welcome that.

My hon. Friend the Member for Sedgefield (Paul Howell) talked about his local hospitality venues. I have visited a number of them, not least Sedgefield racecourse on occasion, which is always a treat. He talked about how this change will be overseen and gave the example of sole traders. This legislation will be employment law and will apply only to people who are employees. The code of practice will go into that in more detail.

My hon. Friend the Member for Clwyd South (Simon Baynes) was born and bred in the hospitality sector and so speaks with real authority. He used the words that I probably mention more than any other in my role as Minister for business: “fair” and “level playing field”. That is absolutely right, and that is what we seek to achieve. He also talked about the representations from Michael Kill from the Night Time Industries Association and how this change is important to attract workers into the sector, and about the great work of Kate Nicholls for the hospitality sector.

My hon. Friend the Member for Leigh (James Grundy) talked about this being a token of thanks. That is absolutely right, because that is what drives service.

My hon. Friend the Member for North East Bedfordshire, as always, challenged us in a number of areas. He mentioned the number of consultations we have held, and basically told us to get on with it. That is what we are doing today, of course: getting this legislation through and putting it into effect as quickly as possible. He talked about whether employment tribunals will have the capacity to deal with these issues. Work is under way across Government to expand capacity within employment tribunals. He talked about cash and cards, and what goes to whom. As he said, cash is by right the property of the employee, unless the employment contract says that it is not. The Bill will clarify that, in any circumstance, whether there is a service charge or not—that is also covered—this money will go to the employees. That is a critical part of this legislation.

[Richard Fuller]

It would be helpful if the Minister confirmed that, as of this Bill passing, when people see a service charge on a bill, they can say that it is covered, that it counts as a tip and that it will go to the employees rather than to other uses within the firm.

[Kevin Hollinrake]

That is correct.

My hon. Friend also talked about my personal tipping. Do I tip? Yes. By standard, if there is no service charge, I would usually tip 10%, or sometimes more, based on performance. Sometimes I will tip nothing, if I do not feel that the service has been at that level. Do I tip if I do not pay for the meal? I normally pay for the meal as well actually, but I have offered to on occasion. I think that covers all his questions, but if he has any more, we can deal with them by separate means.

To respond to the shadow Minister, I again refer to my earlier comments about an employment Bill. The key thing is that we are getting on with key legislation that we think is important. It is not just this legislation; there are other pieces of legislation addressing flexible working, carer’s leave and other issues. She talked about enforcement, which is hugely important. Legislation without implementation is pointless. One of the most effective parts of our regulatory system in the UK, in my view, is employment tribunals. There is no pan-employment regulator in the UK, which, when we think about it, is quite a surprise—there are some in some sectors. There are 30 million people employed in this country, and employment tribunals do a fantastic job, at a fraction of the cost of other regulators. It is ex-post regulation, and I think a more effective means of doing that is through employment tribunals, which are principally a mechanism for enforcement.

The hon. Member talked about zero-hours contracts. A very small proportion of people in this country are on zero-hours contracts—2% to 3%. Many of them are on a zero-hours contract for good reasons and want to be on one, but she raised an important point. This is something we are looking at and determined to tackle. There are some abuses of the system, and we are keen to bring forward new regulations to make sure we tackle that area.

In conclusion, bringing forward the new rules will protect more than 2 million workers from bad bosses and give them an avenue to seek remedies. Businesses will be assured they are not being undercut by companies where bosses keep tips for themselves and consumers will have increased confidence that their tips go to the workers they are intended for. The new rules are backed by Government evidence and analysis. The Government are therefore pleased to reiterate their support for this private Member’s Bill. It has been wonderful to see the support for it in the House during today’s debate.

If I may, I would like to list the civil servants involved, and there are a number of them: Flora Strange, Lucy Allatt, Yasna Reynolds, Mary Smeeth, Tony Gordon, Joe Giles, Simi Bhamra, Bex Lowe, Richard Lewis, Abigail Bridger, Rachel Senior—I can see the Whip moving closer to me; oh no, it’s not, it is the next Minister. I will conclude very shortly!—Anthony Morris, Cora Sweet, Nadine Othman, Laura Matthews, Clara Thiel, Patrick Day and Harry Ravi. Finally, I very much look forward to working with my hon. Friend the Member for Ynys Môn and stakeholders to support the passage of these measures as the Bill moves to the House of Lords. I commend the Bill to the House.