Hospitality Sector: Tipping

Thangam Debbonaire Excerpts

Wednesday 7th March 2018 Westminster Hall

[Justin Madders]

My hon. Friend is absolutely right. That practice is common in petrol stations as well, when people drive off without paying. It is not something that should be visited on the employees, some of the lowest-paid people in our country. It is not right or fair that they should be penalised for something that is entirely out of their control. There are other things the employee cannot control: what if the customer has a complaint about the food, which has been prepared by someone else, and does not leave a tip? What if they have had to wait a long time before being seated? They might be in a bad mood anyway and just not feel like giving a tip.

Those are all vagaries that can affect whether a tip is given at all, but they should not be used to undermine the lawfully agreed pay rate, potentially breaching minimum wage regulations. I accept, as my hon. Friend the Member for Bristol North West said, that it is quite difficult to reach a calculation and know whether the regulations have been breached, but it is certainly possible.

I have heard it said that some employees can end up paying more to their employer in tips than they actually earn in wages for their shift. Does that not tell us something about how this system is completely out of kilter? Conversely, if they do not receive enough tips, they can have money physically taken from them, possibly taking their pay below the minimum wage—albeit maybe not across the whole reference period, but certainly for that particular day—which could leave them out of pocket altogether.

There are other challenges like that, in the hospitality sector in particular. The practice of cancelling shifts at short notice can also lead to people being out of pocket. What kind of country do we live in if somebody can pay for their childcare and their transport to work, only to get to work to be told that they are not needed and can go straight back home again? That is not acceptable.

The blunt truth is that this and many other arrangements in some areas of the hospitality industry are just a scam. They are a device to increase profits at the expense of workers. That is part of a wider problem in that this sector and others seem to treat workers, especially young people, as a disposable commodity. This industry has always involved a fair amount of casual work, but there are companies out there that seem to predicate their business model on exploiting their staff. I believe this is part of a wider trend, which has crept into our economy over the last few years, that work is now insecure and exploitative, and it is not the cornerstone it once was to enable people to build their lives.

That culture has led to an explosion of zero-hours contracts: it says that anybody wanting to become a nurse has to pay £9,000 a year for the privilege of working on the ward and allows an employer to pay less than the minimum wage by calling a job an apprenticeship. It is a culture in which the only way to get into some roles is to take an unpaid internship, which can last for months and have no guarantee of a job at the end. It is a culture that classes more and more jobs as self-employed, thereby avoiding a range of employment rights. It is a culture in which mass redundancies are met with a shrug by those with the power to do something about it.

[Thangam Debbonaire (Bristol West) (Lab)]

My hon. Friend is eloquently explaining some of the ways in which risk is being transferred from the most powerful in the equation to the least powerful. Does he agree that those are all specific examples of how big employers—and sometimes, unfortunately, small employers—can use all sorts of different methods to transfer the risk away from themselves while keeping the rewards?

[Justin Madders]

A whole industry has built up over recent years that involves the chipping away of what were once long-established principles in this country—part of the social contract of our society. It is prevalent in sectors in which collective bargaining is not prevalent, so I say to anyone in this industry or any other to join a trade union, because unions are their best chance of getting protection in the workplace.

We need to end the destructive combination of weak employment rights, greedy bosses and a complicit Government who are leading us in a race to the bottom—a race that will leave us all the poorer. If reports that up to half of all jobs will be lost to automation in the next decade are correct, we need a complete change in the way the Government view work.

We will have to undertake a massive, state-sponsored exercise to reskill our workforce and to develop a culture in this country that says education and redeployment will run through people’s lives. Three, four or five career changes will be the norm; at the moment, we see three, four or five job changes each year. There is no permanence. The state and employers should invest in individuals throughout their adult lives, reward effort with stability and let people have the confidence that they are getting a fair day’s pay for a fair day’s work.

There are many other ways an employer can take money out of their employees’ pockets or get them to work for free: uniform costs, cutting breaks or even stopping pay when the restaurant or bar shuts and expecting staff to work an extra hour or two to clean the establishment. Those are all different ruses and different ways of exploiting people. Expectations are so low, especially among the young, that people do not expect to be treated any better. It is time we offered a better vision and a bit of hope, so that people do not see this way of working as inevitable. I believe we can do better.

--- Later in debate ---

[Chris Stephens]

I thank the Minister for that clarification. However, the facts speak for themselves. Written answers from the Government only a few months ago have told me that the national minimum wage compliance unit has no plans to fill the current vacant posts. I am happy to provide the House of Commons Library with that answer.

The Minister says that there has been increased investment, but the 208,000 workers who are still waiting to be paid the national minimum wage may have a different view, so let me ask him what representations he is making to Her Majesty’s Revenue and Customs to enforce the national minimum wage appropriately in the hospitality sector and what representations he is making to ensure that HMRC is fully staffed and equipped for enforcement of the national minimum wage in that sector. The Low Pay Commission estimates that 1.9 million workers in the UK are currently on or just above national minimum wage rates. That figure is expected to increase, by the year 2020, to 3.4 million workers earning the national minimum wage or just above it, so we need strong action from the Government to enforce the national minimum wage.

On the issue of tipping and gratuities itself, as the hon. Members for Bristol North West and for Hornsey and Wood Green (Catherine West) have outlined, the Government need to get a grip on what credit card payments mean for the workforce—what that means for the worker in practice needs to be made clear to consumers and others. In my view, it is certainly a breach of consumer protection regulations if consumers are being told that tips from credit card payments are going to staff when they are not. I think that the hon. Member for Hornsey and Wood Green has identified such a practice, and I hope that it will be brought to the attention of the House of Commons Commission. It concerns me; I think that if there are facilities in this place where that is happening, hon. Members have a duty and responsibility to ensure that the House of Commons Commission is aware of those allegations and they are fully investigated.

Will the Minister advise us of the steps that he is taking to tighten the regulations in relation to customer credit card payments? I ask because it seems to me that that is a device to ensure that money is not going into workers’ pockets and that the so-called tips are actually an admin fee, as the hon. Member for Bristol North West outlined.

[Thangam Debbonaire]

The hon. Gentleman is making a very clear case. Does he agree that this issue is particularly pressing and urgent, given that nowadays so many people and, in particular, young people do not carry cash? If they are simply using chip and PIN or contactless, which an awful lot of people do, there is no alternative—and people do want to tip someone who has given good service.

[Chris Stephens]

I absolutely agree. As technology moves on in relation to payment methods, it is a matter of urgency that these practices are addressed and real action is taken. This can be interpreted not just as a consumer protection issue, but as an issue for the workers. The employer is in breach of the Employment Rights Act 1996 if there is evidence of tips not going to them.

I thank the hon. Member for Bristol North West for securing the debate. He gave some shocking examples of events in the city of Bristol. I fear that the practice is operating not only in the city of Bristol but elsewhere in the UK, because we have a Government who like to deregulate things.

Finally, can the Minister tell us what the outcomes were of the long consultation? I think that the hon. Member for Bristol North West said that it was three years ago. It seems to be buried somewhere. Can we see what the outcomes of that consultation were?

--- Later in debate ---

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

It is a delight to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Bristol North West (Darren Jones) on his well-made speech. I am genuinely pleased that he has raised these issues in the House and given me an opportunity to consider them and respond to him.

I think this is my seventh week as the Minister for small business, who is responsible for this employment legislation. In that time I have had the Carillion case, the Matthew Taylor report and various other pressing issues, but I am delighted that the hon. Gentleman takes this issue seriously. He raises important points on behalf of his constituents—many of whom, as he rightly points out, are vulnerable—and gives us the opportunity to debate this issue today.

Conservative Members care passionately about the lowest-paid in society, particularly those on the minimum wage and the national living wage, which, as you will know, Sir Roger, was introduced by the previous coalition Government. The Government are committed to creating an economy that works for everyone. The low-paid workers who work hard at our restaurants, bars and hotels across the country should be paid fairly by their employers. There are no excuses for not doing so.

I gently point out to hon. Members, however, that the hospitality industry is a reputable industry that provides fantastic employment opportunities for many of our constituencies across the country. I declare an interest as the previous chairman of the all-party parliamentary beer group. I am a lover of our pubs and hospitality industry. Only yesterday, I spoke at an event, which many hon. Members came to, about apprenticeships in the hospitality industry. They are giving young people careers with great training and great opportunities to earn well and have a fulfilling career in an exciting and dynamic industry. We should not tar all employers who are working hard to build their business and employ people in fulfilling and well-paid jobs with the same brush as disreputable employers.

[Thangam Debbonaire]

I am grateful to the Minister for giving way, but I feel that I must register that I have sat here for almost all of this debate and I have not heard a single person tar the industry with any sort of brush. All Members have done is to be very clear that where egregious employment actions do take place, they need to be rectified. I welcome the hospitality industry in my Bristol West constituency, but I just want employers to pay their workers properly. Most do, but some do not.

[Andrew Griffiths]

I am glad that the hon. Lady and I have found common ground on that point.

The Government are committed to creating an economy that works for everyone. That is why I was extremely concerned to learn from the hon. Member for Bristol North West about the working conditions experienced by some low-paid workers in the hospitality industry. I recall the period of scrutiny that the sector faced in the summer of 2015. Several of our largest restaurants were discovered to be abusing tips earned by their staff. I will clarify for the hon. Gentleman that I recognise the point he makes about the cost of transactions. He will also recognise that income tax is due on payments where the employer acts as the troncmaster—a fabulous word, which I had never heard before I started to prepare for this debate. There is a responsibility on the employer to deduct PAYE, and we must take into consideration the fact that that will result in some payroll costs. Where the employer facilitates the amounts, national insurance contributions are also due. Clearly, it is important that any employer acting as a troncmaster fulfils their legal obligations in relation to the payment of both income tax and national insurance contributions.

The cases raised today are of exactly the same type as the 2015 cases, which are the reason why we had the consultation. I thank the hon. Member for Ellesmere Port and Neston (Justin Madders) for his contribution, in which he raised important issues including the cancelling of shifts. That is a real problem. People turn up to do an evening’s work only to find that if the restaurant or pub is quiet, they are sent home without any further pay by their employer. They expected to do a four or five hour shift, but they may get paid for only one. I am delighted to tell the hon. Gentleman that, in response to the Matthew Taylor report, we are looking at exactly that: the asymmetry between the flexibility required of workers, particularly those on zero-hours contracts, and the employers that can send employees home at will.