Mr Bill Tynan (Hamilton South, Labour)

I beg to move, That the clause be read a Second time.

Although the new clause is simple, it would be effective. Although it stands only in my name, I am confident that many Committee members would support it if it were pressed to a vote. I hope that the Minister will accept it.

I wish to pay tribute to my hon. Friend the Member for Falkirk, East (Mr. Connarty). He promoted a ten-

minute Bill in July. Here we are, nearly a year on, and there has been no progress in the matter. There is an ideal opportunity to insert a new clause in the Bill. I hope that the Government recognise the blatant unfairness of the existing legislation.

Nearly 2 million people in the service industry receive tips from people in one way or another and they could benefit from the new clause. Individual or pooled tips or gratuities should be paid either to the individual or the group. The employer should not be able to use them to subsidise the national minimum wage.

I speak from personal experience. A long time ago, when I was a young child, my sister worked in the service industry as a waitress. In the evening, my parents had to wait to see how much tip money she brought home in order for us to be able to eat the next day. That is how serious the situation was in those days. I am not saying people are in that position now, but they could be. We should look at the matter seriously.

My hon. Friend the Member for Falkirk, East spoke about head waiters being able to take 80 per cent. of the gratuities or tips before dividing the other 20 per cent. among the staff to whom the customers believed they had made a contribution. That needs to be highlighted. It is important. The National Minimum Wage Regulations 1999 state that

''service charge, tips, gratuities or cover charge that is not paid through the payroll''

are excluded from payments toward the minimum wage. That means that other tips are counted towards it. The consequences for 1.8 million people working in the service industry, 67 per cent. of whom are women and 40 per cent. of whom are under 25, are significant. Some 1.8 million people may not be getting what they are entitled to. There was a case that went to the High Court, which decided that the ownership of tips through cheque and credit cards first passes to the employer. That judgment was incorporated into the National Minimum Wage Act 1998 and the 1999 regulations. However, the case was thrown out by the European Court of Justice.

I ask the Minister to look seriously at changing the legislation and adopting the new clause to rectify the injustice and unfairness that happens at present. Nearly 2 million people could benefit. It would be a wonderful plaudit for the Government, along with all the other plaudits that they get, to introduce a new clause of this nature into the legislation. I seriously hope that the Minister will accept the new clause.

Mr Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations, Competition and Consumers), Department of Trade and Industry; Bradford South, Labour)

I understand and have some sympathy with the purpose of the new clause. However, it would not achieve the desired effect. As my hon. Friend the Member for Hamilton, South has said, many hon. Members will recall the private Member's Bill tabled by my hon. Friend the Member for Falkirk, East in July. The new clause clearly carries on the spirit of that Bill; it is intended to ensure that any service charges or cash tips paid by customers should belong to the workers and be additional to the minimum wage.

Let me make it clear that any cash or other tips that are not paid through the employers' payroll do not count towards the minimum wage at present. That is the case whether the cash tips are taken off the table by the waiter or paid through a centralised system. It is already illegal for employers to pay their staff £3 an hour and oblige them to make up the difference through tips.

The regulations were drafted to refer to payments that are not made through the employers' payroll for a number of reasons, but primarily because the long-standing approach, taken under previous legislation, including the wages council legislation, has been that money passing through the employers' books belongs to the employer, and that what counts for the pay calculation is the money paid by the employer to the worker. A pragmatic decision was also taken that the Government should avoid getting drawn into regulating the extremely complex systems for the distribution of tips that exist in the restaurant sector.

As I have said, I understand the aim of the new clause. There is probably general sympathy for the view that tips, but not necessarily service charges, should belong to the waiters, although perhaps other workers also deserve recognition.

It might be helpful to explore how the new clause would work. It makes it clear that all service charges, tips and so on should not be counted towards the minimum wage, whether they are paid through the payroll or not. In effect, it says that the employer must put all of these moneys into a separate fund, and that that fund should be shared out between the workers and paid on top of the minimum wage.

The first difficulty is that the new clause does not state which workers should be paid out of the fund, or what proportions of the fund should belong to each worker. That is not necessarily a problem for minimum wage enforcement officers, but it could be a recipe for confusion. It might be possible for an employer to pay almost all the fund to one favoured worker, and very little to all the others. The new clause would not tackle that.

However, the deeper problem with the new clause is that it creates an unworkable situation; it does not prevent employers from passing tips through the payroll. It would therefore be extremely difficult for enforcement officers to decide whether the correct amount of money—cash, in particular—had been carried through the payroll in each pay reference period.

Let me give a practical example. If an employer paid a worker £4.75 an hour, how could an enforcement officer determine whether that complied with the minimum wage? That would be extremely difficult. The officer would need to find out exactly how much was paid to the restaurant in each pay period in the form of cash tips, service charges and so on. Cash transactions can be especially difficult to monitor. The officer would then need to track all those amounts through the employers' payroll to establish whether the correct total figure for tips and service

charges had been passed on to the workers. It would then be impossible for him to decide whether the amounts paid by the employer to each worker were correct, because, as I mentioned earlier, the new clause does not say which workers should benefit from the tips, or what percentage of the total they should be entitled to receive.

In conclusion, legal intervention into this extremely complex area is difficult. Tackling the question of how much employers should pay on top of the minimum wage and how that should be calculated would be a significant change in the Government's approach. I assure my hon. Friend the Member for Hamilton, South that we have considered the matter closely, and it is hard to see a clear way forward at the moment. I understand his reasons for tabling the new clause. Although the Government cannot accept it, I assure him that we will keep the position under review.

Mr Bill Tynan (Hamilton South, Labour)

I welcome the Minister's contribution, although I do not agree with much of it. I honestly believe that it would be easy to identify which workers should receive a tip because when I go into a restaurant—which is infrequently—whoever serves me receives the tip. It would be easy to identify how much is paid to the individual worker within an establishment, and the tips would be an add-on. Under the circumstances, I ask the Minister to consider continuing discussions about this complex issue.

Mr Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations, Competition and Consumers), Department of Trade and Industry; Bradford South, Labour)

I appreciate the spirit of what my hon. Friend is trying to achieve, and I will consider further discussion on the matter. I would be happy for him to meet officials and to work out a way through such a complex area. With his expertise, he may be able to find ways forwards that others have not thought of.

Mr Bill Tynan (Hamilton South, Labour)

I thank the Minister for that intervention and, under the circumstances, I would be delighted to withdraw the motion. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 43 ordered to stand part of the Bill.