Employment (Allocation of Tips) Bill

Virginia Crosbie Excerpts

Committee stage
Wednesday 12th October 2022 Public Bill Committees

[The Chair]

With this it will be convenient to consider clauses 2 to 15 stand part.

[Virginia Crosbie (Ynys Môn) (Con)]

It is an absolute pleasure to serve under your chairmanship, Ms McDonagh, and to bring this Bill to Committee. I express my sincere thanks to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford, and congratulate him on becoming a Minister. It was he who first tabled this important private Member’s Bill and did so much work to get it to this stage. This groundbreaking legislation will benefit millions of workers, and I am honoured that the Minister has asked me to sponsor this Bill with Government and cross-party support.

The Bill is all about fairness. I entered politics to be a voice for others. The hourly pay in the hospitality sector is one of the lowest of all sectors in the UK. The Bill will potentially benefit more than 2 million people— 7% of workers in the UK—who receive tips as part of their work.

[Mark Eastwood (Dewsbury) (Con)]

My son, Liam Eastwood, works in the hospitality industry. He is quite fortunate that he keeps all his tips, which supplement the quite decent wage that he is paid as well. Does my hon. Friend agree with me that, contrary to what some on the left are saying, the Bill ensures fairness in allocating tips and is not an attempt to reduce a decent living wage?

[Virginia Crosbie]

My hon. Friend is a hard-working champion and advocate for his constituents in Dewsbury, and I have been hearing about his son, Liam, and how he has been working. I highlight the fact that the Bill has so much cross-party support. It is great to see how we are all working together to make a significant change for workers in the hospitality sector, who are having a particularly tough time at the moment.

As I said, the Bill will potentially benefit more than 2 million people—7% of workers in the UK—who receive tips as part of their work. It will ensure fairness across the board, so that whether people work in Pete’s Burger Bar in Holyhead or serve fine dining at the Gaerwen Arms, they will be treated fairly and equitably. Places in dire need of levelling up, such as my constituency of Ynys Môn and other coastal and rural communities, are often home to thousands of people employed in tourism and hospitality. Local employers on Anglesey include the Sandy Mount hotel, Sergio’s, the Sea Shanty, Catch 22, the Oyster Catcher, Dylan’s, and the White Eagle. There are so many to mention—I am sure all Members here have the same story to tell.

I was the first one in my family to stay on at school beyond the age of 16, and it was the hospitality sector—work in restaurants, pubs and cafés, like the Mercury Café and Fifi’s Restaurant—that helped me to pay my way through sixth form and university. The tips I earned were spent on a new winter coat or a pair of warm boots.

There is a drive for better hospitality career opportunities and pay—driven by the likes of Aled Jones-Griffith and his team at Coleg Menai—but jobs in such sectors are often seasonal and poorly paid. For many workers, tips form an important part of their potential earnings, particularly in these challenging times. Although most employers distribute tips fairly and honestly, that is not the case for everyone. That is what the Bill seeks to address.

I will deal with clauses 1 to 14 together. The provisions create a legal obligation on employers to pass on tips to workers in full. The only deductions permitted are those required or permitted under other statutory provisions, such as tax law. That will promote fairness for workers and ensure that they receive the tips they earn. The vast majority of customers give tips on the assumption that they will go to the workers, and do not expect businesses to take a slice. Likewise, workers rightly expect to receive their tips in full, in recognition of their hard work.

The Bill will also provide greater transparency for employers and workers on how tips should be treated, and will create a level playing field for businesses that already pass on tips to workers in a fair and transparent way. Finally, consumers will have the confidence that the full value of their tips will go to workers.

Let me set out the detail of the clauses. Clause 1 inserts into the Employment Rights Act 1996 a new part on how employers must deal with qualifying tips, gratuities and service charges, which I will refer to as tips. The Bill will apply to all tips paid by a customer to an employer, including tips paid by card, which are usually paid into the employer’s bank account. Some 80% of tipping is now paid by card.

The Bill will also apply to tips paid directly to a worker if the employer controls or influences the allocation of tips—for example, if the employer tells workers how to share the tips between themselves. The Bill will not apply to tips received by workers when an employer or associated person does not control or significantly influence the allocation of the tip.

Clause 1 aims to capture all scenarios in which an employer has control over tip allocation and distribution, to prevent them from taking advantage of that control to exploit workers. The clause provides that

“tip, gratuity or service charge”

means the actual amount paid by the customer. As employers cannot make deductions for things such as processing fees, the Bill ensures that workers receive the full amount of tips.

Clause 2 introduces a fairness requirement that requires employers to ensure that the total amount of tips is allocated fairly among workers of the employer at the place of business where the tips were paid. That means, for example, that tips paid by customers at a particular restaurant will not be shared with workers at a different restaurant of the same employer. In determining how to allocate tips fairly, the employer must have regard to the relevant provisions of the code of practice, which is described in later clauses. The amount of tips allocated to a worker is payable to the worker by the employer.

Clause 3 sets out how the employer’s obligations apply when tips are allocated by an independent tronc. The Bill allows for tips to be allocated by an independent tronc as long as the arrangements are fair overall and have regard to the code of practice. The word “tronc” comes from the French word for an alms box; it is about pooling and redistributing tips. The tronc can be employer controlled or independently operated by a member of staff or a payroll or accounting company. Tipping practices vary among employers, and the Bill seeks to support diverse practices as long as they are fair. Clause 3 also provides that tips can be payable to workers by independent tronc operators, either directly or through the employer’s payroll.

Clause 4 details when tips must be dealt with. It sets out that an employer must ensure that tips are allocated to workers and paid no later than the end of the month following the month in which they were paid by the customer. For example, if a tip was paid on 8 April, the employer would need to deal with the tip by 31 May.

Clause 5 sets out how an employer’s obligations regarding tips apply to agency workers, who are workers supplied by an agency to work for a business, such as a restaurant. They benefit from the Bill and will be treated as if they were workers directly employed by the restaurant. That ensures that agency workers do not miss out on tips they have earned. The clause defines which agency workers are eligible to be covered by the protections and requires tips to be fairly allocated to eligible agency workers. It allows a business to pay the agency worker’s share of the tips to the agency, which must then pay that sum to the agency worker. This is because agency workers are often not on the business’s payroll.

Clause 6 concerns the written policy and records that employers must keep of tips. All employers that deal with tips on more than an occasional or exceptional basis are required to have a written policy on dealing with tips. That policy must include whether or not the employer requires or encourages customers to pay tips and how the employer ensures that all tips are dealt with in accordance with this legislation, including in respect of how the employer allocates tips. The employer is required to make the written policy available to all workers of the employer at the place of business.

Employers are also required to keep records relating to tips. Records must be kept for three years and include the total amount of tips paid, the amount allocated to workers and, if relevant, the amount allocated to an independent tronc operator. The requirement to keep records is essential to ensure that workers have access to the information they may need to enforce their rights. The clause provides workers with a right to make a written request to access limited relevant parts of their employer’s tipping records. That allows workers to gather evidence to seek redress if they are not being treated fairly.

Clause 7 explains the enforcement mechanism for employers’ obligations regarding tips. Workers can present complaints to an employment tribunal that an employer has failed to comply with their obligation to allocate tips fairly, or failed to do so in time. The clause also allows agency workers to present complaints. The limitation period for those complaints is 12 months.

Workers’ rights to bring forward such claims are at the core of the Bill, as employment rights need to be underpinned by effective enforcement. The clause sets out how a tribunal should determine complaints about tips. When a complaint by a worker is well founded, the tribunal must make a declaration to that effect. The tribunal may also make a range of orders, including an order requiring the employer to revise any allocation of tips they have made, or an order requiring the employer to make a payment to a worker of up to £5,000 to compensate them for consequential financial loss.

Clause 8 explains how workers can complain if their employer breaches the information provisions. That includes an employer failing to comply with the requirements relating to written policies dealing with tips, records of how tips have been dealt with or workers’ written requests for information. Workers can bring forward a claim to an employment tribunal in those circumstances. The limitation period is three months. Workers’ rights to bring forward those claims are essential to the Bill, as access to that information allows employers to be held accountable and workers to check that what they are paid is correct and fair.

The clause sets out how a tribunal should determine complaints about the employer’s policy or record keeping obligations. When a complaint by a worker is well founded, the clause states that the tribunal must make a declaration to that effect. A tribunal can also order a payment from the employer to a worker of up to £5,000 to compensate them for consequential financial loss.

Clause 9 gives the Secretary of State powers to issue, revise or revoke a code of practice for the purpose of promoting fairness and transparency in the distribution of tips. The code of practice is necessary to help to describe different circumstances that are fair or unfair in more detail than the Bill could. The code can also be adapted to changing circumstances more easily than primary legislation. To issue a code of practice, the Secretary of State must consult ACAS and publish a draft to allow stakeholders to make representations, before laying the draft before both Houses of Parliament for approval.

The clause establishes the procedure to revise or revoke the code, and details the legal effect of the code. It sets out that the code is admissible as evidence in proceedings before an employment tribunal and, where relevant, must be taken into account.

Clause 10 sets out some additional provisions relating to tips. It prevents employers from bringing restitution claims against workers in respect of tips. If an employer is ordered to revise their allocation of tips and they have over-allocated tips to a worker, those tips are not repayable from the worker to the employer.

The clause preserves existing contractual arrangements relating to tips. That means that if a worker was already entitled by their contract to receive a certain percentage of qualifying tips, they would remain entitled to those tips despite the passage of the Bill. However, payments under the statutory and any contractual obligations can be set off against each other to avoid double counting.

The clause prevents workers from opting out of their rights under the Bill and provides further definitions, including of “customer” and “place of business”. It clarifies certain situations in which it is unclear to which place of business a tip is attributable. The clause also provides that the Bill applies to tips paid by customers on or after the date on which the obligation to allocate tips fairly comes into force. The Bill is not retrospective.

Clause 11 amends certain provisions of the Employment Rights Act 1996 with regard to tips and clarifies that a worker cannot contract out of, or consent to amend, their right to receive tips that have been allocated to them by their employer. It also amends the definition of “wages” to include tips.

Clause 12 amends other pieces of employment legislation as required. That is because some Acts require amendment to ensure the provisions will apply correctly and cohesively once the Bill comes into force.

Clause 13 sets out where the provisions of the Bill apply in the United Kingdom and provides that the Bill regulates qualifying tips paid at, or otherwise attributable to, a place of business located in England, Wales or Scotland. The legislation does not regulate tips in Northern Ireland because employment law is devolved to Northern Ireland.

Clause 14 is the final clause apart from the title. It defines how and when the Bill comes into force, and confers the power on the Secretary of State to determine when clauses 1 to 12 come into force by the making of regulations. Clauses 13 to 15 come into force on the day the Bill is passed.

Let me close by thanking the Chair, the officials who worked so hard to make the Bill a success and everyone present for supporting the Bill. Once again, I thank in particular my hon. Friend the Minister for putting his faith in me and for everything he has done to bring the Bill this far. We all want workers to be treated fairly, and we all want to see the rewards for hard work distributed to those they are meant for. This is a great opportunity for stakeholders to engage in setting up the code of practice. Let us work together to ensure the Bill achieves what it has set out to do.

[David Linden (Glasgow East) (SNP)]

It is a great pleasure, as ever, to serve under your chairmanship, Ms McDonagh. I congratulate the hon. Member for Ynys Môn on taking the Bill forward on behalf of the Minister, the hon. Member for Watford. I congratulate him in particular on rising to ministerial office; I have always found him incredibly thoughtful since he entered the House in 2019. I never quite thought it would be a Conservative Member bringing forward legislation to strengthen employment rights, so I am grateful to Comrade Russell for doing that. I only hope that the current Leader of the Opposition can bring himself to start supporting employment rights, because he seems to be on a bit of a slippery wicket on that one.

I want to offer my support and that of my party for the whole Bill, from clauses 1 to 15. My constituent, Joan Tomson from Carmyle, was in touch with me in the summer about this specific issue of how to protect tips for staff. I am fortunate to have in my own constituency excellent restaurants such as Kastriot’s in Baillieston and Gia’s of Shettleston. They would not dream for a minute of trying to steal their staff tips, but this Bill addresses the bad employers out there who behave in a completely unacceptable way. It is right that we bring forward legislation to bring them to heal.

It will come as no surprise to the Minister when I say that the Government need to bring forward a full employment Bill. It is noticeable that we are having to bring forward piecemeal bits of legislation, such as the excellent Bill before the Committee or, indeed, the legislation introduced by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) on neonatal leave and pay. These are hard-won battles that we are having to fight on employment rights, but if anything has been taught as a result of the shameful actions of British Airways and P&O Ferries—

--- Later in debate ---

[Dean Russell]

I thank the hon. Member for his comments. I am always happy to meet Members and discuss how they feel we can create better workplaces and support workers’ rights. I already have many meetings with colleagues to ensure that we are heading in the right direction on that.

With regard to the comments made by the hon. Member for Glasgow East, I want to be clear that more needs to be done to ensure that tips earned by workers go to them in full, which is why the Government are supporting the Bill. I am incredibly grateful to my hon. Friend the Member for Ynys Môn for taking forward this legislation.

I also note the comments made by my hon. Friend the Member for Dewsbury about his son, Liam. I know he is a proud father of Liam; he regularly talks about how proud he is of him. Liam is a credit to him, with the work he is doing while at university. The key point my hon. Friend made is that this is not about topping up salaries. That is an important point in the Bill, and it is important that we communicate it. This is a gratuity, tip or service charge that is a “thank you” on top of a salary. It should never be used by employers, and the Bill makes it clear that this is not about topping up salaries; it is about an additional piece and making sure that workers receive tips fairly and squarely.

I will now conclude, because we have covered a lot of ground and I am very pleased with the feedback from the Committee. The Bill provides vital protection for low-paid workers. Bringing forward these new rules will protect over 2 million workers from bad bosses and give them an avenue to seek remedies. It will be good for businesses too, as they will be confident that they are not being undercut by companies where bosses are keeping tips for themselves. The Bill is an excellent step. My hon. Friend the Member for Ynys Môn has received support from both sides in the House and in Committee, and I want to thank everyone for the collaborative way we have all worked, for the way that the feedback has come in and for their support inside and outside the Chamber to make sure that workers are protected in this way. I look forward to following the Bill through its parliamentary stages.

[Virginia Crosbie]

This House is at its best when people work together, and the Committee has been a shining example of that co-operation and collaboration. I thank all hon. Members who have been on this short Committee. As a Welsh MP, I am delighted that there are two other Welsh MPs, both of whom are women, on the Committee. Tourism is a key sector in Wales, contributing around 12% of all employment.

I thank those who contributed to the debate. My hon. Friend the Member for Dewsbury talked about his son Liam, who has had a very positive experience in the hospitality sector. The hon. Member for Glasgow East talked about a level playing field, and I congratulate him on his private Member’s Bill on neonatal care. The hon. Member for Glasgow South West talked about the support of the unions, and Kate Nicholls, who heads up UK Hospitality, has been very helpful with the Bill. My hon. Friend the Member for Blyth Valley talked about fairness, and my hon. Friend the Member for Cheadle talked about the importance of a PR campaign and whistleblowing.

This is an important Bill, which enshrines a right that seems evident to many consumers already, and I am sure hon. Members will agree that it is not right that business owners can keep part or all of the tips given in good faith to workers by customers who recognise the good service they have received.

[Tonia Antoniazzi (Gower) (Lab)]

This is a great Bill that will give the hospitality sector the boost that it needs and provide people with security in their job. Does the hon. Lady agree that this is really needed, particularly in parts of Gower and her constituency of Ynys Môn, where we have such a shortage in hospitality?

[Virginia Crosbie]

I absolutely agree with the hon. Lady. This Bill is so important, and it is important that we can get these people back into the sector. Tourism and hospitality is one of the key sectors across the UK, but particularly in Wales.

[Fay Jones (Brecon and Radnorshire) (Con)]

I congratulate my hon. Friend on the progress of the Bill. As she mentioned, there are three female Members of Parliament from Wales on this Bill Committee. Hospitality is a sector that employs more women than average, so does she agree that the Bill is a very good step towards getting more women into the workplace?

[Virginia Crosbie]

I absolutely agree with my hon. Friend, and she makes an important point. The average salary in the sector is one of the lowest in all sectors in the UK, and the sector is particularly important for women.

I would like to highlight the fact that, although we have three Welsh MPs, we also have two MPs from Yorkshire—I do not want them to feel left out. I am grateful for everyone’s support so far, and I particularly thank the Minister. I hope we can use this momentum to deliver the successful passage of the Bill and benefit workers right across the UK.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 15 ordered to stand part of the Bill.

Bill to be reported, without amendment.