Employment (Allocation of Tips) Bill

– in the House of Commons at 11:16 am on 15th July 2022.

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Second Reading.

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art 11:18 am, 15th July 2022

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

I am incredibly pleased that we have time today to debate this important issue and Bill. I am the Member of Parliament for Watford, which has a thriving hospitality and service sector. That means that many of my constituents, and those from surrounding areas, work in roles where tips, gratuities and service charges are given to them—for the simplicity of my speech I will refer to those things as tips from now on, rather than give the full list.

For individuals who work in those roles, tips are an important part of receiving a thank you, and in many cases they are a token gesture from customers. Across Watford, not only do many people working in hospitality receive tips, but probably everyone—we are a very generous constituency—will have given a tip over the past few years. I was shocked when I found out, especially during the summer period after lockdown when we could reopen restaurants and were able to go back out and give tips, that hospitality workers could not necessarily guarantee that they could keep them. I think most people would be shocked to know that if they gave a tip through the business—via a credit card, say, as is increasingly more prominent and popular—there is no guarantee that the person or team they gave it to would receive it.

Of course, in most instances businesses are fair and kind and ensure that those tips get to the staff who were given them. Sadly, however, we know that there are always those who are unscrupulous and unfair and will choose to exploit their staff and keep the tips for themselves, sometimes in part, sometimes in full.

Photo of Lyn Brown Lyn Brown Shadow Minister (Foreign, Commonwealth and Development Affairs)

I congratulate the hon. Gentleman on bringing forward this Bill. It is certainly one I support, and hopefully a final victory for the long-running fair tips campaign run by Unite the Union. As he says, however, we know that some employers can be extraordinarily devious in exploiting loopholes in employment law at the expense of either the public purse or workers. What consideration is he giving to future-proofing this Bill to make it really difficult for operators, including those using digital platforms such as Deliveroo, for example, to avoid the spirit of such important legislation?

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art

I thank the hon. Member—I would like to say friend—for her question. I will come to that later, but it sits within the code of practice and ensuring that at the heart of this Bill is a word she will hear me repeat many times: fairness. That is baked into the approach that will be taken. As I will say later, I am looking forward to meeting businesses, sector representatives and unions to chat about how we make that code of practice work well and ensure it is fair for everyone involved.

As hon. Members will know, over the past few months media reports have highlighted that the taking of tips, especially via credit cards, and businesses taking more than their fair share—indeed, taking a share of something they should not even be getting—is increasing. One of the reasons that concerns me, and why this Bill is so important not just in principle but right now and should be enacted as soon as possible, is that we are seeing a rise in the cost of living.

People who work in hospitality should not need to rely on tips as part of their salary. I am absolutely clear in the Bill that it is not about topping up salaries; it is about a gratuity, tip or service charge in addition. However, employees should be able to keep them. That should be at the heart of what we do, and that is what this Bill will do. That is why I say that fairness is key, because we all have a sense of fairness. We know what is right and wrong, and we know that if we give somebody some money to say thank you, they should be able to keep that money or choose to share it with others. That is key. A great deal of work has been done over the past few weeks to try to get this proposed legislation right, and I hope that people will see that in the Bill and that the code of practice will cover that.

Photo of Mary Robinson Mary Robinson Conservative, Cheadle

I am grateful to my hon. Friend for bringing this important and overdue Bill to the House. We are all thinking of the people in hospitality who will benefit from it. I have been contacted by constituents who have had up to 15% of tips removed from their pay packet. Obviously, this Bill will address that. However, this measure will also matter to members of the public too. How many of us ask when we go to pay our bill, “Will the tips go directly to the person who has given us such great service tonight?” yet do not know whether the answer we get will be correct? This Bill will ensure that we have that security and that people paying their bill can trust that that tip will go to the person who has given them that service. I hope that my hon. Friend will have every success with this Bill, and that it will be backed up with a media campaign to let people know that their tips will go to the person who actually deserves them.

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art

My hon. Friend makes a brilliant point. I thank her so much for her endorsement and support, and for representing her constituents. I have heard the same stories from so many Members. In fact, a lot of Members—I will not name them—tell me that they worked in hospitality when they were students, and have experienced this issue; it really cuts through. On my hon. Friend’s point about a media campaign, I invite colleagues from across the House to help me promote this legislation as widely as possible. I hope that in a year’s time—hopefully sooner, but it might be a bit later—we get to the day when a customer never again has to ask, “Will you definitely be able to keep this tip?” That is one of the ambitions of the Bill.

The Bill is not about bashing business. Most businesses comprise good people, good entrepreneurs and good CEOs, and most pass on tips fairly. The businesses that I have spoken to—especially in my constituency and through fantastic Members of Parliament across the House—support the legislation, and hospitality businesses definitely do so.

Let me turn to fairness for workers, which is covered in several aspects of the Bill.

Photo of Christina Rees Christina Rees Labour/Co-operative, Neath

I congratulate the hon. Member on bringing this excellent Bill to the House. Fairness is the key word. He has mentioned that he is working with businesses and trade unions. I am a Labour and Co-operative party MP. May I ask whether he has reached out to the Co-operative party? Many businesses are co-operatives, and I am sure the Co-operative party would be grateful if he reached out to it.

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art

The hon. Member makes a brilliant point. The idea of the code of practice is to ensure that we do that engagement, and I am hopeful that when we reach out to such organisations, they will help with the media campaign. We need to ensure that everybody knows about the legislation and to highlight that there are businesses that do not pass on tips. In the meantime, I hope that people challenge businesses on that when they speak to them.

The Bill will provide greater transparency for employers and workers in teams regarding how tips should be treated; that will be clear to everyone. It will create a level playing field for the majority of businesses that already pass on tips to workers fairly and transparently, ensuring that they know that other businesses will do the same as they have always done. As we have already mentioned, through the Bill consumers will have the confidence that the full value of their tips will go to workers, and the premise of the Bill is that 100% of tips will go to the workers. The code of practice will agree how that will be shared, and we can turn to that point later.

Photo of Jill Mortimer Jill Mortimer Conservative, Hartlepool

May I speak on behalf of all the backroom staff in hospitality venues? As a teenager, my son worked for many years as a pot washer for very little money, but he always felt really appreciated when he got the little top-up that was his share of the tips. We should remember all those people and how important it is to them to know that they are valued.

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art

Absolutely. I thank my hon. Friend for her contribution. May I also mention the fabulous staff in this place? I know that on occasion, some very kind Members of Parliament do give tips, even though it might not be reported.

I have covered some points around fairness for workers, but I will go into a little more detail. The Bill will create a legal obligation for employers that receive tips directly from customers, or that have control or significant influence over the distribution of tips that workers receive directly, to distribute tips to workers fairly and transparently. The obligation will be attached to the total amount of the qualifying tips paid at, or otherwise attributable to, an employer’s place of business, and the tips must be allocated fairly between workers at that place of business. For example, in the case of a big chain, the tip will go into a pot to be distributed to everyone who works not in the chain, but at that particular venue.

Importantly, the situation will remain the same in cases where employers do not receive, or have control or significant influence over, tips. For example, the Bill will not cover me giving a tenner directly to a waiter or waitress at the end of a meal, as it is clear that it is for them. However, the Bill would come into force if they put the money through the business, perhaps via a credit card payment. Similarly, the Bill will not cover situations where employees already have their own tip jar that they look after, because those tips will not be touched by the business.

Fairness is key to ensuring that businesses and employees know exactly where they stand, but we also need to ensure that there is some flexibility. Every business is different—that is the nature of it. Someone working in hairdressing is going to have a different approach to the way they receive or manage tips from someone who works in a restaurant, bar or hotel. What we are trying to do with the code of conduct is to make sure that that is covered, and I hope that is going to come after this Bill today—

Photo of Mark Jenkinson Mark Jenkinson Conservative, Workington

I am sorry to interrupt my hon. Friend in mid flow. As someone who has had many an argument with restaurant managers about removing service charges in London, in order to be able to give cash directly to staff, and nearly been thrown out of restaurants for it, may I put on record my congratulations to him on bringing this Bill to the House today? Let me also add my thanks on behalf of all the hospitality industry workers in my constituency and across the wider Cumbrian area who will benefit from this.

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art

I thank my hon. Friend for that. He stands up so strongly for workers and for the rights of people across this whole country, but particularly in his constituency. I am very conscious that there is a thing called the tronc system, although I will not go into too much detail on it now because of the time available. Tronc is an arrangement commonly used in the hospitality sector, where an employer delegates the collection, allocation and distribution of tips to a person or persons known as a “troncmaster” or tronc operator. The Bill does not seek to regulate the operators of independent tronc systems, which are commonly used by many businesses already. However, I raised this matter when I was talking through how to make this Bill the best it can be and I found that some stakeholders have been concerned about whether a business could then put pressure on a troncmaster to do something that is unfair. So, to mitigate that risk, under this Bill workers can bring an employment tribunal claim if an employer’s use of an independent tronc is not fair. I hope that that will capture any concerns on that front.

As we have just discussed briefly, another aspect of fairness is ensuring that there are no deductions from tips. So at the core of the Bill is the creation of a legal obligation for employers to distribute all tips, gratuities and service charges to workers, without any deductions. When customers pay service charges, they expect that money to go in full to the staff and to the individuals they have asked it to go to. Sadly, some employers retain part or the whole service charge without passing it on to their workers, so this Bill will deal with that. Some hon. Members have asked me whether this legislation will also cover credit card deductions and administrative costs, and some businesses have raised that issue with me too. Since 2018, payment processing fees cannot be passed on to consumers. In line with that, employers will not be able to deduct payment processing fees from tips––that also includes mandatory and discretionary service charges which are added automatically on to customers’ bills by some hospitality venues. My hon. Friend Mark Jenkinson will be relieved that that will no longer be the case, as he has probably had arguments on that front in the past. Administering tips should not impose significantly on a business’s operating costs, but that credit card admin charge might be significant for an individual. Two or three payments can be significant for an individual when we are talking about tips. So, again, this is about fairness; businesses do not incur a significant cost in respect of this money from tips, but if it were taken off the staff, it would be significant for them. It is important to include that provision in the Bill and to put what I have just set out on the record.

Ensuring that tips are passed on to workers in full, with no deductions by employers, will make a real difference to workers’ lives, while not creating a burden on businesses. As I noted earlier, an important practical aspect of the Bill will be the code of practice, which I will expand upon now for a few moments. The Bill includes provisions for the Secretary of State to issue a statutory code of practice, which will promote fairness and transparency in relation to the distribution of qualifying tips, and help tribunals determine whether it is fair for an employer to make certain tronc arrangements. Employment tribunals must have regard to relevant provisions of the code when determining whether an allocation of tips or making of certain tronc arrangements is fair. The code will consider some of the factors that may be relevant to fairness and will provide a number of examples and real-life scenarios that exemplify fair tipping practices, to help reflect the myriad circumstances in which employers can handle tips in an acceptable fashion. Christina Rees mentioned engagement, so let me say that the code will be published in draft and consulted on before the relevant sections of this legislation come into force. The code will also require approval from both Houses of Parliament. I hope that that reassures colleagues across the House that there will be scrutiny and that we will ensure that it is covered fully. The defining principles of the Bill will need to capture the nuances of fairness. As I have mentioned, I want to engage widely to ensure that the code of practice really works. I welcome anyone reaching out to me after Second Reading. If the Government and the Minister support the Bill going through to the next stage, and the House joins us in that approach, I will be really keen to engage and hear hon. Members’ points.

One of the core issues is remedies and enforcement. Crucially, the Bill will be enforced by workers through the employment tribunal system and will provide employment tribunals with remedies where an employer has made deductions from tips or has not allocated tips in a fair and transparent way. If an employer does not allocate tips fairly among workers, the employment tribunal can make an order that does one of three things: require the employer to revise any allocation of tips that they have made, recommend that the employer deals with tips in a certain way, or require the employer to make a payment to one or more workers so that they receive the tips that they should have received.

The employment tribunal may additionally compensate workers by up to £5,000 for related financial loss attributable to a breach of the provisions. Workers will also be able to make a complaint to an employment tribunal if their employer does not keep sufficient records relating to tipping practices; the tribunal can order the employer to compensate workers by up to £5,000. It is worth noting that workers must consult ACAS before bringing forward a claim. The majority of employment disputes are settled before they reach an employment tribunal.

I would like it to be absolutely clear that nothing in the Bill will make changes to taxation for employers or employees. It is purely about employees’ rights and workers’ rights.

I will conclude my remarks because I want to hear the fantastic speeches that are no doubt coming up. I thank the Minister and her predecessor, my hon. Friend Paul Scully, for their incredible support with the Bill; I hope that I can convince colleagues to get it over the line today. I thank everyone who has helped me to introduce it to the House: hon. Members past and present, constituents and my fabulous Watford businesses and residents, who have repeatedly raised the importance of the issue. As we are all aware, the private Members’ Bill process is fragile, so I am keen to work with all hon. Members, all organisations and everyone I can to make sure that the Bill works. I urge the Minister to support it.

Photo of Nigel Evans Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means)

We have all learned a new word today: “tronc”, which I will try in Wordle later.

Photo of Felicity Buchan Felicity Buchan Conservative, Kensington 11:38 am, 15th July 2022

I apologise if I sound repetitive, but I said I supported the previous Bill today because it was the right thing to do, and I support this Bill because it is the right thing to do. I think my constituents, who probably spend quite a lot of their take-home pay in restaurants and bars, would be very shocked if they learned that their tips, whether or not made by credit card, are actually the legal property of the restaurant owner. That would really surprise people.

The timing of the Bill is important because hospitality clearly faces major challenges, particularly in recruiting staff. The more we can professionalise the hospitality sector and its employment practices, the better: it will make it more likely that restaurants and bars can be fully staffed. That is very important to me, because I represent a central London constituency. My constituency of Kensington and that of my neighbours in Westminster probably has the greatest density of restaurants, bars and other leisure facilities so the Bill is very important to residents.

I was shocked to hear that my local gastropub is no longer able to open on a Monday or Tuesday, not because it does not have the clientele—it is always overbooked, with people waiting for tables—but simply because it cannot get the staff. We cannot have a situation in which businesses, which are so important for livelihoods and for the general economy, cannot operate because they cannot hire staff. The Bill will go a small way towards making the hospitality sector more attractive to staff because they will have a legal entitlement to tips and will not simply have to wait for their employer to do the right thing.

Staffing in this sector is going to be so important going forward. We need to ensure that we have workers who can keep the economy going. In London the tourist season is beginning to start again. I am delighted to see in my constituency that not only domestic tourists but lots of international tourists are returning. So it is important that restaurants, bars and other leisure units can continue to function.

Doing the right thing is critical, and professionalising the industry is also very important. This is good timing, because as we are all aware, workers are suffering from the effects of global inflation—it is global; it is not a UK issue. So it is very important that employees are getting the proper pay package. I was shocked to hear that in the past some employers even used tips to make up the minimum wage. Clearly, that is no longer happening. It has been ruled out, but it is important that the intention of consumers is fulfilled. The intention of consumers is important. When I eat out, I give an extra 12.5%, not because I think that my burger should have cost 12.5% more but because I think that the waiter and the other staff deserve that extra remuneration.

The statutory code of conduct will be critical; we should not diminish its significance. How tips are allocated among staff will be important. Lots of staff work in these establishments, not simply the waiter who comes to the table. So getting the fair balance between the frontline and backline staff is going to be important. We should not diminish the significance of that. I am well aware that the Bill is just one step, and getting the details right is going to be critical.

My hon. Friend Dean Russell spoke about the consultation that he has already done, but I encourage him to ensure that the detailed consultation carries forward. I am well aware that lots of restaurants are hierarchical institutions and perhaps the person who cleans the dishes in the back of the kitchen is not recognised to the same extent. However, clearly that person is integral to the restaurant. We, as consumers, may not see them, but they are critical and it is important that they are recognised.

I very much welcome the Bill, and it is shocking that the provision is not already the law. I appreciate the efforts of my hon. Friend Dean Russell, who introduced this Bill in 2021 but dropped it in anticipation of the employment Bill. Although I am sure the employment Bill will happen at some point, it was not in the Queen’s Speech, so it is good that my hon. Friend has introduced this private Member’s Bill.

This Bill is a great first step in getting things right for employees, but it is also an important step in ensuring employers are on a level footing and trading on an equal basis. Restaurants that do the wrong thing by their staff should not be in a better competitive situation because they are able to offer cheaper prices to consumers. This Bill is good not only for employees but for employers, because it puts everyone on the same footing and ensures that employers do right not only by their employees but by their consumers, who give tips in the full expectation that they are paid to employees.

I am fully supportive of this Bill. There is no question but that it is the right thing to do. It is important for my constituency, where so much of the economy is made up of restaurants and bars in the night-time economy. I am very grateful for the Bill on behalf of my constituents.

The Bill is also important because it further professionalises the sector, and we will find that many employment practices have to be professionalised in the post-coronavirus world, because only then will employers be able to recruit staff. In every regard, this is an important Bill that formalises what we all think is right, that employees should be able to retain their tips. The Bill fulfils the expectation of every consumer when they go out to eat and drink, and long may that continue.

Photo of Wes Streeting Wes Streeting Shadow Secretary of State for Health and Social Care

On a point of order, Mr Deputy Speaker. The Met Office has issued its first ever red warning for the heatwave that the country is likely to experience on Monday and Tuesday next week. Has the Department of Health and Social Care given you any notice of its intention to make a statement to this House about the health consequences for the public, not least given that this red warning means there is likely to be a risk to life?

Of course, our newspapers, television screens and airwaves are full of reports of overwhelmed ambulance services and accident and emergency departments. Given that the Secretary of State for Health and Social Care failed to answer my urgent question on Wednesday, I would have thought that invisible man might make an appearance today to advise and reassure the public that our public services and emergency services will be able to cope in the light of this emergency.

Photo of Nigel Evans Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means)

I thank the hon. Gentleman for his point of order, and for giving me forward notice. I have been given no notification that there will be a statement from the Department of Health and Social Care, or any other Department, today. Should that change, the House will be informed in the usual manner via the annunciators.

It is timely that the hon. Gentleman makes this point of order, as people should take advice in these unusual circumstances. People should take water with them when they travel, they should make sure there is plenty of ventilation and they should seek attention if they are feeling unwell. I thank him again for his point of order.

Photo of Darren Henry Darren Henry Conservative, Broxtowe 11:49 am, 15th July 2022

I thank my hon. Friend Dean Russell for presenting the Bill, and for allowing me to contribute to the debate.

I often tip, whether it is the barber or someone in a restaurant or pub, and I enjoy tipping, because I want to reward the people who have worked so hard to give me good service. It is always my hope and intention that the tip will go to the worker who has provided the service that day. Conversely, I would rather not tip someone who had provided a surly or otherwise poor service. In a restaurant in Broxtowe, for instance, I want my tip to go to the waiters and chefs in recognition of, and gratitude for, their great service. I am therefore delighted that the Bill seeks to create a legal obligation on employers to allocate “tips, gratuities and service charges” to workers, without any deductions.

This situation—the unfair distribution of tips—has been going on for a while now. It was in 2015 that the then Business Secretary, my right hon. Friend Sajid Javid, launched an investigation of the abuse of tipping practices. I know that many employers rightly give the tips to their workers, but my hon. Friend seeks to create a level playing field through legislation, which will not only make competition fairer for businesses, but ensure fairness for the employees who work so hard.

I am pleased that the Bill draws attention to this issue, especially given the immense suffering that the hospitality sector had to endure as a result of covid-19. It will ensure that we maintain the incentives for people to work in the sector, and aid its continued recovery following covid, and I congratulate my hon. Friend again on presenting it.

Photo of Jill Mortimer Jill Mortimer Conservative, Hartlepool 11:52 am, 15th July 2022

I congratulate my hon. Friend Dean Russell on this important and necessary Bill. Let me echo his sentiments in saying how great it is that after more than two years of lockdowns and restrictions, we are once again talking about visiting our fantastic local restaurants, pubs and other hospitality venues. We have no shortage of those in Hartlepool: Portofino, The Pier Restaurant, Sambuca, The Owl, No 8 and Juniper Lounge—all of them just a short step away from my office—along with LilyAnne’s and the fabulous Railway Café, run by Lesley. I urge anyone who is able to do so to take advantage of this wonderful weather and visit our marina In Hartlepool, because it will be like the Riviera there this weekend.

The employees in all these venues always provide an excellent service and work extremely hard. They deserve every penny of their tips, and I know that their employers—and, indeed, most small businesses—agree with me. Unfortunately, some businesses, usually the larger high-street chains, do not pass on gratuities to their staff. No one wants to see that extra service charge on their Bill and have to wonder whether the money will go to the person who has provided the service. I have done the same as my hon. Friend Mark Jenkinson: I have said quietly to the server, “Will this come to you?” and if I see a nervous shrug, I ask for the charge to be removed and I give the person cash. These are often young people, including students who are topping up their incomes by working their way through university or college. We need to ensure that they receive the money that they deserve.

The Bill will ensure that tips are always passed on to employees and divided fairly, and I am proud to be supporting it. As inflation and the cost of living increase, it is more important than ever for hospitality staff in Hartlepool and elsewhere to keep their tips. I realise that some businesses fear that these changes may have a negative impact on their finances—that is why it is so important that we continue to support them through the aftermath of the pandemic, as indeed we are—but I am also aware that businesses which ensure that their staff are properly rewarded for hard work and providing service with a smile will, in the long term, increase their customer base, their revenue and their income. I know I go back to places where I like the staff and get to know them. The bar where everybody knows your name is the one you always want to go to.

Rewarding hard work and good customer service would also ensure a welcoming and friendly atmosphere in our hospitality venues, encouraging more people to come together in our pubs, restaurants and cafés, and thereby strengthening our communities and social fabric. For too long, people have stayed at home watching Netflix, and they need to go out and talk to one another again. It is so important, especially after covid restrictions and being confined to our homes, that we promote measures that enhance our sense of community, which has always been strong in Hartlepool, and I am sure this Bill will do exactly that. This Bill is certainly overdue, and I am glad to be supporting it today.

Photo of Edward Argar Edward Argar Conservative, Charnwood 11:55 am, 15th July 2022

I very much welcome the Bill from my hon. Friend Dean Russell. As you will know, Mr Deputy Speaker, he is nothing if not persistent once he has a cause to pursue. I recall that he introduced this Bill in 2021, and as it did not proceed into law at that stage, he is back again and determined to get it through the House on this occasion. I am very happy to be here today to support him in that endeavour.

A lot of the speeches have focused on the hospitality industry—restaurants, bars and similar—but of course, as has been mentioned, this issue is drawn more widely than that and goes across the broader service industry of hairdressing, barbers and so on. A whole range of services are impacted by the issue that my hon. Friend is highlighting today.

Many of our constituents will be unaware, and would be surprised were they made aware, that there is no law—no statute—that directly addresses this issue, and that tips or service charges paid through the business are legally the property of that business. Therefore, it is down to the good will of that business or the approach of that business to ensure that tips get to the staff for whom they are intended. There is no statutory protection of that currently.

Yet as my hon. Friend and my hon. Friend Felicity Buchan have said, when any of us or any of our constituents go to a restaurant or the barber and pay a tip, we do it because we want to reflect to the members of staff who have provided exceptional service or courteous and friendly service to us that we recognise that service and want to reward them directly for it.

I take the point made by my hon. Friend the Member for Kensington, which is absolutely right, that this is not just about those who are front of house with whom we interact, but about the people in the kitchen, those doing the washing up, and a whole range of others who play a key part in the experience we have enjoyed. It is right that tips are distributed fairly among those who have played a role in our experience. None the less, we expect those tips or service charges to go to those people who have done the work for us, so I very much welcome the Bill.

My hon. Friend the Member for Watford was absolutely right to highlight throughout his speech the word “fairness”, and the Bill goes to the heart of that. It is about fairness to those who are providing the exceptional service and fairness to consumers who believe that the tips and service charges they are paying will go to those individuals. At this point, I should of course pay tribute to the campaigners and to the staff who do the amazing job. I also pay tribute—as Ms Brown, who is not in her place at the moment, highlighted—to Unite the union and others who have been pressing this issue.

When I first entered the House in 2015, this was one of the issues running hot in the news. At that stage, the evidence suggested that about two thirds of employers took some form of deduction from tips or service charges, and sometimes as much as 10%. Of course, there has been progress since then, which is very welcome. However, during the pandemic, people developed behaviours—I do not think they have changed subsequently —of paying for things less with cash and more with cards, therefore putting any tips or additional money through the business in that way. I think the Bill is very timely, and it is the right thing to do.

As has been set out, the Bill creates a legal obligation essentially to allocate tips fairly. Rightly, it does that through a statutory code of practice. That is the right mechanism because it allows for a degree of flexibility and the code to be developed in slightly slower time. There will be complexities, which hon. Members have highlighted, relating to businesses and how to define particular elements, so that is the right approach in such a complex landscape.

The other point highlighted is about people—staff and consumers—being aware. Transparency is vital in this space, so I welcome the inclusion, in the opening remarks from my hon. Friend the Member for Watford, of a written policy that gives people transparency and an understanding of what they can expect, but also—

Photo of Jill Mortimer Jill Mortimer Conservative, Hartlepool

Does my hon. Friend agree that that is one of the greatest problems with this? Relatively recently, we have always had on bills an optional service charge that is anything but optional. Many people pay it without even really looking at it or considering it, and no one knows if the money goes where it is intended to go and should go. The Bill will make the very important change that we need.

Photo of Edward Argar Edward Argar Conservative, Charnwood

My hon. Friend is absolutely right. That goes to the heart of transparency and openness to the consumer but also to those working in this context. My hon. Friend the Member for Watford, in drafting and presenting the Bill, has, as ever, been diligent. He has set out the route to an employment tribunal, which will be an option, and given those tribunals the remedies they need to make redress, should they find a particular employer has not complied with both the spirit and the letter of the Bill and the code of practice.

From my understanding of the Bill, this is hugely important. The Bill has only 15 clauses, but they are important and tightly drafted. It addresses not just the passing on of tips and service charges without their being top-sliced and deducted, but the vital need for fairness in how they are distributed between staff.

I am absolutely delighted to support my hon. Friend’s Bill. It is about fairness to consumers, but most importantly fairness to the staff who day in, day out provide all of us with exceptional service. They have been through a challenging time. It is important that we recognise this in statute. I suspect many businesses do the right thing and it is always a shame when one has to legislate, but it is right, just as with the previous Bill we debated, to do the right thing by those who provide exceptional and courteous service to us. It is about the kind of society we wish to see and the approach we wish to see within that society. I welcome my hon. Friend’s Bill. He has my complete support and I very much hope that it will have a smooth and swift passage on to the statute book.

Photo of Saqib Bhatti Saqib Bhatti Conservative, Meriden 12:03 pm, 15th July 2022

I pay tribute to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend Jane Hunt. This is the first time I have had the chance to speak with her at the Dispatch Box. I worked closely with her while chairing the all-party parliamentary group for small and micro businesses. She was the vice-chair and was always a great source of support and an advocate for small and micro businesses. I wish her all the best and long may it continue.

I also pay tribute to my hon. Friend Dean Russell for doggedly pursuing this agenda and pushing the Bill. The west midlands has been known for its great exports over many centuries. You may not know this, Mr Deputy Speaker, but my hon. Friend was born in my constituency, so I am glad to count him as one of the exports that is continuing to do great things in Parliament and for the people of Watford. I thank him for bringing the Bill forward. As my hon. Friend Edward Argar said, it is about equity and fairness. My hon. Friend the Member for Watford has pursued this agenda and made sure that the Government recognise the importance of tips in the lives of hospitality workers. I must say, I am a bit surprised that we are even having to have this debate. So many times when I have experienced the great hospitality in my constituency, I have wondered whether my tips actually reach workers’ pockets, and whether a service charge goes to the employees or is for the services that the business—the employer—is providing.

I am pleased that there will be a code of practice to try to address the imbalance in equity and fairness. My hon. Friend the Member for Charnwood said that the majority of businesses do the right thing, and we should recognise that. The majority of hospitality businesses make sure that their staff are taken care of and instil equity and fairness, but clearly that is not the case right across the sector, which is why we need the Bill.

It may well be that we are not a tipping society. Across the pond in the United States, tipping is an integral part of the hospitality sector. When I or my friends have been there, we have always been told, “Please make sure that you tip, because it is part of the income of hospitality sector workers”. It would be remiss of me not to recognise the Government’s great work in getting the national living wage to where it is, but tips are a necessary add-on. Given where inflation is, the Bill is a timely way of addressing issues of equity and fairness.

I have a number of points to raise with the Minister, and I am sure she will address them. On service charges and the code of practice, when I speak to hospitality businesses, they tell me they have not had an easy time over the past few years. It has been incredibly challenging, for obvious reasons—lockdowns are not a friend to many parts of the economy, but specifically to businesses in the hospitality sector. They have had to try to survive, and many have been grateful for the support that the Government have given them, whether business rates relief, bounce back loans or the furlough scheme. Those have all been great assets. I was intrigued to learn that where businesses in the hospitality sector were able to take advantage of the furlough scheme, many of their workers ended up getting second jobs and then did not return to the original employer because they were being paid much more. That has contributed to a significant shortage of workers in the sector—a shortage that was already there pre covid. The issues with skills are of long standing, but they have been made more acute by the decisions that people have had to make during covid.

In that context, a tipping system that is in statute, supported by a code of practice, and embodies elements of fairness, equity and justice—those quintessential British values—will certainly go some way to addressing the acute skills shortage, so it could be an asset to the hospitality sector’s ability to start recruiting again. It is not the only way we need to address the issue, and I am sure the Minister will be working hard to look at that, but it will provide great support. I hope she can provide some clarity on that.

The other aspect of the Bill is service charges. I am less confrontational than my hon. Friend Mark Jenkinson, and I sometimes do pay the service charge, not knowing whether I can or should challenge it. Perhaps I should channel my inner Workington man—

Photo of Saqib Bhatti Saqib Bhatti Conservative, Meriden

Indeed. However, the question still stands: if a business deems a service charge necessary for the service that it provides, how will that be addressed? What I do not want to see is an additional line with a new name, adding a new cost that consumers have to pay. That may well undermine the notion that we should tip, because we will already be subjected to another percentage fee. Perhaps that is something that the code of practice will look at.

While I have the Minister’s ear, let me reflect on a roundtable I attended in the past two to three weeks at Nailcote Hall, which is a great hospitality venue. Meriden, bordering Birmingham and Coventry in a beautiful setting in the west midlands, and with the airport and great connections, is a great place for hospitality businesses to flourish. When things are great, it is fantastic to see the hospitality sector thriving, but in the post-covid world, a lot of my inbox has been taken up trying to address the issues that those businesses face. In the early days of covid, that meant trying to get liquidity and loans to help them survive and then thrive, and now it means helping them through the issues that they currently face.

The hospitality sector wanted me to send a clear message to the Government that while they have had a reasonably good period of post-covid recovery, during which people have returned, a lot of work still needs to be done. We should not underestimate the damage that covid has done to the hospitality sector. I return to the point about having clarity in the code of practice. I think hospitality businesses would welcome that guidance.

On that note, I pay tribute again not just to hospitality workers but to the majority of businesses that recognise how important their workers are, how important retention is and how important it is to create an environment in which they are able to recruit. The staff, of course, make up and define a business, and for the businesses that do not have a good environment, their reputation gets out there. I wish we did not need this Bill. Businesses should be doing the right thing. The majority of businesses do; I understand why they do that. I would welcome a meeting with the Minister to discuss some of the issues around the hospitality sector and what more we can do.

Finally, let me reflect on something that my father always said—I say “said”; he still runs the business and adheres to this. He always says, “If you take care of your staff for even one day, they’ll take care of you for a lifetime.” That is certainly the approach that I took in business, and I hope that I can take it forward in whatever roles I have throughout my life.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Climate Change and Net Zero) 12:13 pm, 15th July 2022

I congratulate Dean Russell on bringing the Bill forward and on securing a place in the ballot so that it stands a chance of becoming law. I also thank the hon. Members for Kensington (Felicity Buchan), for Broxtowe (Darren Henry), for Hartlepool (Jill Mortimer), for Charnwood (Edward Argar) and for Meriden (Saqib Bhatti) for their contributions. They all have very simple, one-word constituency names, which is quite a relief after the previous debate.

There was a common theme in all those speeches: customers want to do the right thing by the serving staff and other people who deserve tips—hairdressers, people in nail bars or whatever—but it is sometimes difficult to be sure that the money we give because we want to reward the person who served us will go to that person. This is very much a question of fairness and wanting to treat people right.

In the previous debate, we talked about how all employers would probably want to do the right thing by a member of staff whose child was born prematurely or was sick, but that they might not be in a position financially to do so. I think this is a slightly different situation, because there is not really an excuse for not passing tips on to staff, even if a hospitality business is struggling. We know there are pressures on them from business rates, the impact of covid closures and staff shortages. Speaking to people in the restaurant trade, another pressure is the cost of some of the basic ingredients and such things as fuel bills. We know that they are under pressure, but no matter what, that is not an excuse for holding on to tips that deserve to go to the people who are being tipped.

The issue affects so many people. About 2.5 million people work in the hospitality sector, representing more than 7% of the workforce. As we have heard, often they are younger people, and it tends to be an ethnically diverse workforce. Because of the turnover in the sector—in some ways it is a casual job, often on zero-hours contracts, and there is often illegal working as well, and there is a job to be done in trying to stamp that out—the workforce are particularly vulnerable to exploitation and not being able to assert their rights.

I pay tribute to Unite the union in particular. It is a difficult sector to organise in, because it is not like one big factory with a workforce who tend to be there long term, who all identify with each other and who are in the same place. It can be difficult to fight for people’s rights in this sector, but Unite has done a good job. There was a case recently where Pizza Express was found to be deducting 50% of card tips from its staff who were on minimum wage. That was reducing their incomes by about £2,000 a year. Thanks to Unite taking action, the policy was scrapped and the company has now returned to a more equitable system where front of house staff keep 70% of the tips they make. Anyone going to Pizza Express would not have been expecting that sort of practice to be going on, and it is good that that changed. It was reported that some workers cried in relief when the change was made, because having those tips makes the difference between them being able to get by and not.

I think it was the hon. Member for Kensington who talked about the national minimum wage, which was introduced by the Labour Government, and in 2009 we had to make it illegal for tips to contribute to the national minimum wage. That was the right thing to do, and I am proud that we did that when we were in government, just as I am proud that we introduced the national minimum wage to begin with. As we are all being consensual and working cross-party today, I will not dwell on how difficult it was to get the national minimum wage through. You were probably here at the time, Mr Deputy Speaker, but it was before I was elected. I gather that the debates went all through the night, people had to sleep in their offices and it was difficult, but I am glad that we have converted those on the Government Benches and they now accept it. I genuinely mean that. The fact that Conservatives are now boasting about support for the living wage shows that we won the argument, and I welcome their support for Labour policies. I hope that after the next election, they will be on this side of the House supporting everything that we do.

As I have said, so many people work in the hospitality and tourism sectors, and many of them are vulnerable to being exploited. The Resolution Foundation reported that in 2019, 52% of workers in the hospitality sector were low paid compared with 15% of all workers. The sectors are hard-hit by the pandemic, and tips can make a huge difference. It is disappointing, as with the previous Bill we considered today, that this issue has not been addressed as part of the employment Bill we were expecting from the Government, but that was shelved ahead of the Queen’s Speech. The hon. Member for Watford shelved his previous attempt to get a Bill on this issue through because he was expecting it to be covered in the employment Bill. There is so much that we could legislate for. The Government promised action in 2016, and again in 2018, and it was in the 2019 manifesto.

I remember that after my hon. Friend Darren Jones, who cannot be here today, was first elected in 2017, he had a Westminster Hall debate on this subject. It was he who first introduced me to the word “tronc”. Every time we were in the Tea Room, he seemed to want to talk to me about troncs. This debate has brought back memories. He did very well in coming near the top of the private Member’s Bills ballot a few years ago and wanted to introduce a Bill on tips, but he also wanted to introduce a Bill that would become law, because that does not happen often: I have been here 17 years and I have never managed to get a place in the ballot. When he spoke to the Department, it would not support his Bill, so he introduced something else that was very worthy but would not get much attention, because he wanted to do something the Government would support.

I think it was 2020 when my hon. Friend introduced his other Bill, so it is excellent that something has moved since then, and I am glad the Government have now managed to find a working arrangement with the hon. Member for Watford. He detailed some of the concerns that will have to be addressed in Committee, as did other hon. Members. There are some things still to be thrashed out, but I hope that Labour members of that Committee will be able to be part of a constructive working relationship and that we will get this Bill into law as soon as possible, so that the people on the receiving end of the tips can start to see the benefit.

Photo of Nigel Evans Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means)

I should have said this during the last debate, but I will say it now: I welcome the Minister to her new role.

Photo of Jane Hunt Jane Hunt Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 12:20 pm, 15th July 2022

Thank you very much indeed, Mr Deputy Speaker.

I thank my hon. Friend Dean Russell for bringing this important Bill forward. He is well known for his hard work both for his Watford constituents and in supporting his colleagues, but now he will possibly be able to transform the whole country, based on this work.

I am pleased to confirm that the Government will support this Bill. Bringing these new rules into force will give new protections to millions of workers in industries where tipping is common, such as hospitality. This is especially crucial now as we continue to recover from the pandemic.

Hon. Members were given quite detailed information about their own constituencies to help them during the pandemic, and I was surprised to find that there are 3,000 people employed in the hospitality sector in Loughborough alone. That equates to exactly the same number as my biggest employer, so that was quite a surprise and very interesting.

It is good to hear support for the Bill in this House. I will take some time to address some of the points hon. Members have raised today, but first I will speak a bit more about why the Government are supporting it. Many were appalled to hear the stories a few years ago of bosses wrongfully pocketing tips intended for their workers—money left by customers who wanted to recognise the hard work and excellent service they had received from the staff.

That is why my Department took action to understand the scale of the problem. We launched a consultation to determine whether previous voluntary guidance in this area was sufficient. We have continued to develop policy positions based on evidence and conversations with stakeholders. The Government believe that tips should go to the workers who earn them and that businesses that withhold tips from staff are wrongfully benefiting from money intended for hard-working staff. While many businesses already pass tips on to staff in full, our evidence shows that nefarious practices persist, with businesses deducting up to 10% in some cases.

Some people have raised concerns with us that bad practice has increased since the pandemic. The Government are therefore pleased to support the changes in the Bill, and I will reiterate some of the key details about what the new rules will and will not do. As my hon. Friend mentioned, upon passage of the Bill the rules will prevent employers from making any deductions when distributing tips, apart from those required or permitted by existing legislation such as tax law.

We are not making any changes to tax law under the new rules. How tips are treated for purposes of taxes and national insurance contributions depends on whether they are made in cash or by card and whether they are made directly to the worker or processed by the business or by independent tronc. That will remain the case.

Under this Bill, anyone who is a worker will benefit from new rights, but it does not cover those who are self-employed. The rules will apply across all sectors, and that is the right thing to do. However, to be clear, businesses that do not normally deal with tips will not be significantly affected by the Bill. This is also a good opportunity to remind the House that tips already cannot be used to count towards national minimum wage pay. That has been the case since 2009.

Photo of Chris Stephens Chris Stephens Shadow SNP Spokesperson (Fair Work and Employment)

I am grateful to the Minister for re-emphasising that point. Will she confirm that it is still the Government’s intention to pursue rigorously employers who are still trying to make tips part of the national minimum wage and that those companies should be named and shamed, as is currently the case?

Photo of Jane Hunt Jane Hunt Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I thank the hon. Gentleman for his question, and I can tell him that, yes, that is absolutely the case.

I will now talk about the proposed code. A voluntary code of practice on this topic was published in 2009. Our evidence shows that voluntary guidance alone has not been enough to stamp out bad practice. This Bill will therefore require employers to have regard to a statutory code of practice. The code will continue to be developed in partnership with key stakeholders, and will be subject to a full consultation period before the final version is brought to the House for approval. The code will outline a fair and transparent allocation of tips, as set out in different example scenarios. It is very important that the code continues to be developed with stakeholder input, so that we do not inadvertently disallow certain arrangements that are considered fair in some workplaces for the benefit of both businesses and workers. It is important that the code can be updated in the future with the approval of Parliament but without any primary legislation, in order to keep up with changing practices.

I will now address some of the specific points made by colleagues in the debate. I thank my hon. Friend the Member for Watford again for all he has done. He raised a matter where I almost have to declare an interest, in that my husband interrogates the waiters whenever we go out to make sure that they are going to get the tip—it is surprising how many say that they will not get it. My hon. Friend Felicity Buchan clearly showed a good understanding of her local businesses and her constituency. She talked about burgers, and I quite agree that it is the service we pay for in the tip, not the burger itself. As she said, each establishment will create its own fair system available to everyone working there, so that the kitchen staff and cleaners can be included. They can decide what they want to do and that will then be followed. She also referred to consumers, and the Bill is fair to them as well. They are within my brief too, so I would like to be fair to them. I commend her for what she did while working in the Department for Business, Energy and Industrial Strategy until recently.

My hon. Friend Darren Henry talked about his experience and examples from restaurants in Broxtowe, and I can speak from experience when I say that the restaurants there are very good indeed. My hon. Friend Jill Mortimer talked about the great variety of restaurants on the Hartlepool riviera, which provide such great service to the people of Hartlepool—again, she is to be commended. My hon. Friend Edward Argar talked about statutory protections that are currently lacking in the system and about rewarding the service given. He referred to the need to be timely and fair, and the word “fair” comes through again and again in this Bill. He is absolutely spot on.

I thank my hon. Friend Saqib Bhatti for his kind words and I thoroughly enjoyed working with him on the all-party group for small and micro businesses. He talked about a shortage of workers because of the pandemic, and indeed previous to that. I hope that this Bill will attract workers to the sector and help it to become one where people can form a career and get on in life. I am happy to meet him to discuss the hospitality sector, as he requested.

The shadow Minister, Kerry McCarthy, referred to her surprise about some of the well-known businesses that have been taking tips. I absolutely agreed with her on that, as I was surprised as well. Conservatives always support hard work, and I think that is the vein in which we have been talking more than anything else.

Ms Brown, and my hon. Friends the Members for Watford, for Cheadle (Mary Robinson) and for Meriden raised concerns about employers using tips to top up low-paid workers. The law is clear: tips, gratuities and service charges cannot count towards the minimum wage. The Bill does not alter that position, and under these proposals employers cannot use tips to make up national minimum wage pay. My hon. Friend the Member for Meriden rightly said that we need more workers to get the pay and tips they have earned, to help promote employment in the sector, as I mentioned. Actually, there is no need to wait for this Bill to be passed; the sector should put its plans in place well in advance.

My hon. Friend the Member for Watford referred to deductions from tips for card payments and admin fees. To be clear, under this policy, employers must pass on all tips to workers without any deductions, other than those required or permitted by existing legislation—for example, normal tax rules will apply. They cannot make any deductions to cover the costs of running a business, including the cost of processing card transactions or other administrative costs.

My hon. Friends the Members for Watford and for Meriden referred to clarity around the code of practice. As I mentioned, the statutory code of practice will be published and consulted on before being laid before both Houses of Parliament for approval. The code will be developed through consultation in partnership with stakeholders. We hope to start informal discussions on the draft code later this year. There will be more formal consultation on a draft after the Bill has received Royal Assent. The code will provide details on when the Bill applies, how many employers should distribute tips fairly, tronc arrangements, employers’ tipping policies and record keeping. It will also include illustrative scenarios, such as sharing out tips between front of house staff and kitchen staff.

In conclusion, bringing forward these new rules will protect more than 2 million workers from bosses who do not currently do the right thing, and give them an avenue for seeking remedies. Businesses will be assured that they are not being undercut by companies where bosses are keeping tips for themselves, and consumers will have increased confidence that their tips are going to the workers they intended them for. The new rules are backed by previous Government evidence and analysis. The Government are therefore pleased to support this private Member’s Bill.

Photo of Chris Stephens Chris Stephens Shadow SNP Spokesperson (Fair Work and Employment)

I thank the Minister and I congratulate Dean Russell on bringing forward this important Bill. I make a similar plea to hon. Members about the previous Bill: will she discuss with the Leader of the House how we can get the legislation through quickly? I would like to take part in Committee if possible.

Photo of Jane Hunt Jane Hunt Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

Yes, of course I will ask about that. There are reasons, related to HMRC and that kind of thing, why it might still be delayed, but I will do exactly as the hon. Gentleman requests.

It is good to see the support for the Bill in the House today. If we take away—takeaway is the operative word, given what we are talking about—one thing, it is fairness. I look forward to continuing to work with the Member in charge of the Bill, my hon. Friend the Member for Watford, who is a dear friend and works tirelessly for the people of Watford, and with stakeholders to support the passage of the measures.

Photo of Dean Russell Dean Russell Chair, Speaker's Advisory Committee on Works of Art 12:32 pm, 15th July 2022

With the leave of the House, I thank all hon. Members for their contributions. We heard from my hon. Friend Felicity Buchan, an intervention from Christina Rees, and from my hon. Friend Saqib Bhatti—I did not realise I was one of the great west midlands exports, but that is wonderful to know. We also heard from my hon. Friends the Members for Broxtowe (Darren Henry) and for Hartlepool (Jill Mortimer)—I will endeavour to attend the Riviera as soon as I can.

I particularly liked the speech from my hon. Friend Edward Argar. In his previous role, in which he was always fantastic, I would normally be lobbying him about my hospital, so it is wonderful to hear him talking about hospitality instead—slightly different. We also heard from the shadow Minister, Kerry McCarthy, and Chris Stephens. I give my heartfelt thanks to the Minister, at the end of her incredibly successful first week in the role, for signalling the Government’s support for the Bill. To know that we will hopefully change the lives of many millions of people across the UK is incredible.

I hope that hon. Members on both sides of the House agree that this is an important piece of legislation to ensure fairness and transparency for workers and employers. I am hugely grateful to everyone who has campaigned and fought for tips to be fairly given to workers for such a long time; it is wonderful to know that I am standing on the shoulders of giants. The Bill represents a great opportunity to tackle the rising cost of living, to increase consumer confidence and to help ensure that hard-working individuals get the money they have been given and deserve. I hope this Bill will go through the House with full support, and when giving a tip as a thank you at the end of meal I look forward to not having to say, “Will you get all of this?” Hopefully that day will come in the next few months. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).