Employment (Allocation of Tips) Bill - Second Reading

Part of the debate – in the House of Lords at 11:10 am on 3 March 2023.

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Photo of Lord Mitchell Lord Mitchell Labour 11:10, 3 March 2023

My Lords, if it were not for tips, I probably would not be standing here today. In the mid-1960s, I was living in New York, studying for my master’s degree in business administration at Columbia University. Sadly for me, I had no money, and New York city is no place to be poor, so I got a job as a waiter at a restaurant enticingly called Your Father’s Mustache. It was located in Greenwich Village; it was noisy and crowded, and it sold beer and cocktails, burgers and huge sandwiches—I loved it. I worked four nights a week, starting at 9 pm and finishing at 3 am. It was hard work, especially because, by 8.30 am the next day, I had to be at my class, all prepared. My basic pay was 99 cents per hour, minimum wage, plus tips. Being English, at the time of the Beatles I achieved some degree of notoriety, and I was good at hustling for tips. I would earn about $60 per evening—and that was in 1965.

In the days before credit cards it was all about cash tips. I learned about dynamic tipping—assessing the customer and working out how best to maximise my reward. Most important of all was positioning the change on the tray so that he took the coins and notes nearest to him and left me with the tip I felt I deserved. For me, it was the difference between happiness and misery. I secured my MBA, returned to London, had a fulfilling career in IT, and here I am today. Without those tips, who knows how it might have turned out?

All this is to emphasise as strongly as I can that my heart and soul are with the recipients of tips. I know just how crucial these payments are to those who work in pubs, bars and restaurants. I must thank the noble Lord, Lord Robathan, as well as Dean Russell in the other place, for introducing this Private Member’s Bill, which now has Government support. It is a vital Bill, and when it becomes an Act it will give certainty of earnings and security to many hundreds of thousands of people who work in the hospitality industry.

I would like to raise a few areas where I believe we are at risk of unintended consequences. I ask the noble Lord to consider these points, and I would welcome the opportunity to meet him prior to the Bill going to Committee.

The first point concerns agency workers. I fully understand why, at first glance, it seems equitable that agency workers qualify for sharing in the tip allocation on the same basis as directly employed staff. But I am told that agency rates have now gravitated upwards, to the extent that there is now an implicit tipping share built into the daily fee. Therefore, if agency people also share in an establishment’s tips, does it not mean that, in effect, they get the benefit of the tip twice over? That cannot make sense. If it stays as the Bill proposes, will that not mean that many staff will move towards being hired as agency workers rather than direct employees? That cannot be a good thing.

The second point concerns credit card payments. I know that fundamental to this Bill is the concept that employees should participate in the sum total of all tips, with no deductions. However, I think credit card charges should be exempted. If there is a built-in tip of, say, 12.5%, and the total bill is paid by credit card, which most bills are, then the establishment will have to pay the credit card charge on not only the base cost but the tip portion of the bill. Surely the credit card fee is a direct cost of the transaction, and the restaurant and the staff should bear that cost proportionately. My suggestion is that a maximum deduction of up to 2% should be netted off from the tipping pool. That does no more than cover the additional cost to the business arising from the customer’s generosity, and with a maximum rate set to avoid any abuse or excessive deduction from an unscrupulous operator.

Finally, I would like to address the issue of multiple-site operators. The Bill as it stands states that the tipping pool should originate from the bar or restaurant where the employee works. That makes sense. But there are many restaurants and bars which have associated premises, and it is not uncommon for staff to be transferred from one to another. Imagine a situation where a successful restaurant wants to open another restaurant and wants to transfer skilled staff from one to the other to get the place up and going, or where a business operates a large establishment which generates significant tips and a smaller restaurant a mile down the road with a much lower level of tips. New restaurants take time to find their feet and build up clientele. Operators will, from time to time, need to move staff from one premises to another, perhaps to cover illness or staff shortages. If the Bill stays unamended, it will remove the incentive for staff to move from a successful restaurant to a start-up, or from a larger site to a smaller one. That does not make sense. Surely a group should have the facility to amalgamate its tipping pool across multiple restaurants.

As I said, I would welcome the opportunity to discuss these issues with the noble Lord. The hospitality industry was battered by Covid, and now it is being battered by inflation and staff shortages. We have a good Bill before us. We should do all we can to minimise the burden on employer and employee alike.