Employment (Allocation of Tips) Bill - Second Reading

Part of the debate – in the House of Lords at 11:34 am on 3 March 2023.

Alert me about debates like this

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade) 11:34, 3 March 2023

I thank the noble Baroness, Lady Chapman, very much indeed—she could always give me a tip for the work we are doing today, but I do not expect one. I pay tribute to my noble friend Lord Robathan for bringing this Bill forward, and I also make special mention of Dean Russell, the honourable Member for Watford, for the tireless work he engaged in to make sure that after a long period, this very important matter is now placed before this House.

It comes down to a simple matter of fairness. As customers, we were all surprised by this, and I was certainly surprised to discover that the tip I gave when I went to get my family pizza was not going to the staff—the people in the restaurant who were expecting it, and whom I was expecting to pay. For me, this is as much a matter of accurate description, to ensure that what people are saying is happening actually is. At the end of the day, this Government are committed to fairness and ensuring that employees get the right rewards that it is expected they will receive. I am delighted to take this Bill forward today.

I will go through some of the points that were raised. I covered the point made by the noble Lord, Lord Browne, in that now absolutely is the time. Looking back over the last few years, we were disturbed by the Covid crisis, but the initial voluntary scheme simply did not work, which was a pity. In my experience, the majority of restaurateurs are good, honest hardworking people, and it is important to highlight that running a restaurant is not a straightforward business, particularly for small restaurants. Restaurants and pubs are important to our community, and it is important that we support them and do not impose onerous legislation on them. But unfortunately, because the voluntary code of practice was not a success—and that had to be borne out in time—we were obliged to go into a consultation, and here we are. There is no looking back from this point, but it has taken a while for good reason.

Regarding the contribution of the noble Lord, Lord Mitchell, I do not know whether Your Father’s Moustache is still in existence, but it sounds like he was earning more then—adjusted for inflation—than he might be being paid to attend the House today. I must therefore question his business acumen, quite apart from his patriotism.

I will cover some of the important points that have been raised, first, on agency workers. At the core of the Bill, the honourable Member for Watford and other officials have been trying to work out how to make this fair. It is considered in principle fair to pay temporary staff in a place of hospitality for the work they do. It would seem appropriate that, if someone works for a period in a restaurant or pub, they be rewarded with a share of the tips, commensurate with their input. Having said that, there have been comments—such as those of the noble Lord, Lord Mitchell—about additional pay for agency workers as opposed to full-time workers, who may be more committed to an establishment. This matter will be covered in the consultation and will be included in the guidance issued by the Secretary of State, which will eventually appear in the code of practice. It is not necessarily straightforward, and it is important that practices already in place in establishments passing on the full quantity of tips be able to continue. I believe that they will be able to continue with smoothing out the fairness between agency workers paid at different rates and full-time staff who are paid at potentially lower rates for their full commitment to the establishment. This is a principles-based activity, based on what is fair, and the system should be designed to ensure a smoothing out of that, but it is certainly worth raising.

The Bill is quite specific that credit card charges may not be passed on to the employee—to clarify, they may not be deducted. We feel that is important because it creates a level playing field for all employers in making sure that there is no discrimination. We found that under the voluntary code various different charges were being levied—the so-called administration charges—from 2% up to 10%. The reason we believe the voluntary code was not working is precisely that employers were starting to impose fixed-cost charges on tips that we felt were not right to go to the employee, so we have not allowed for credit card charges. There may be other charges that need to be considered in the consultation, but they will come out during that discussion. However, that is an important principle that has been laid out and made clear.

Multisite operations have been mentioned. That topic has arisen quite a lot in these discussions. We have sympathy regarding the complexities. Again, let us return to the principle of fairness and what is right. A lot of this will come out in the consultation and will be developed into the code of practice, but the principle here is that the unit itself—the restaurant or pub—is the economic entity that will allocate the tips to the individuals working in that place of employment. The Bill is designed specifically to ensure that that is the case. It is not designed to allow large corporations to pool tips and allocate them accordingly. We are trying to draw a line between the gratuity or pourboire given by the customer to the person who has been serving them and those around them. That is an important point of principle. I am sure this will be discussed in the consultation period, but I want to make it clear that currently it is specifically to ensure that a single site is the recipient of the tip process and then that is distributed accordingly.

The noble Lord, Lord Shipley, raised the importance of the consultation process, as did my noble friend Lord Bourne and the noble Baroness, Lady Chapman, and of ensuring that it is widely publicised. We do not necessarily have the resources in this instance to embark upon a highly expensive publicity campaign but actually I do not think that will be necessary. If any noble Lords in this House have been involved in this process, they will have been contacted by large numbers of restaurateurs and recipients of tips to ensure that their views are clearly heard. This is an emotive subject that commands a lot of popular appeal. We will make every effort to ensure that the consultation is widely held and that people are aware of the opportunities to contribute to the consultation process in order to effect a strong code of practice.

On the point about publicity and how to project an establishment’s tip policy to clients, it is clearly stated in the legislation that it has to be available to the employee on day one when they arrive, it has to be clearly stated, and it must be available for clients as soon as we have developed the code of practice so that they can see, if they wish, what the tip practice is. There is currently no specification to put an extended tip policy on the receipt or whatever—I think that might be rather cumbersome—but it should certainly be available to the client. More important than a technical description of how every dollar is allocated among the staff is the knowledge that we are putting in place today, thanks to the good work of my colleagues, a fair system where clients and customers who tip staff know that all that money is going to the deserving workforce who have created the environment and given the service that has been received.

The noble Baroness, Lady Deech, made a series of extremely thoughtful points. I too have enjoyed the concept of a troncmaster, which is a phrase that has only recently come into my vocabulary. That is a very practical way of delivering fairness among employees. In the work that I have done, I have been struck by how straightforward and sensible this system is, and we want to keep it sensible and straightforward. I emphasise that we are not trying to increase bureaucracy and burdens upon hard-working restaurateurs, innkeepers and pub owners. That is not what this is about. It is about fairness and making sure that the majority of restaurateurs who do the right thing are able to do so in a continuing fashion, and that the people who do not are made to.

The tronc system allows for an independent person, often someone associated with the restaurant—they might be its accountant or whatever, which is perfectly reasonable—to make sure that there is a fair allocation of tips. I understand that there are some troncmasters who franchise their operations so that there are multiple troncmasters, so there is a job there if the $60-a-day tip does not continue to come to the noble Lord, Lord Mitchell, in terms of making sure that there is a fair allocation. That seems to me to be an effective way of doing it. It was asked whether it was current and appropriate; we think so, and we have very much factored that into the legislation.

I do not want to go on too long but there was an important point about the monthly pay cycle. It is worth noting that in this House, when you go to one of the restaurants or eateries and you leave a gratuity, as I do—I hope I am known as a generous tipper—that money is accumulated over the year and then paid out in January to all the staff in the House of Lords. That includes the doorkeepers and the secretarial staff, though I am not sure whether it includes Hansard, the clerks and so on. The point is that this is more complicated than it seems. In the consultation we will work to ensure that fairness is the basis of this rather than procedure. The reason why we have the one-month payment cycle—that is, one month after money has been received—is to ensure that employers pay the staff on time for the work that they do when it comes to passing on tips from customers. That is absolutely right and it should be the core principle. Frankly, we should resist trying to find mechanisms and delays around that process, while at the same time understanding the importance of making sure that people who have systems that are fair can still operate, given the flexibility required.

I am grateful to my noble friend Lord Bourne for supporting a fast-track process. I do not think the House of Lords is necessarily known for its fast-track processes. I would not necessarily encourage any circumventing of our marvellous and ancient processes, but I agree that we should get on with it, and we are pleased to be doing so.

I thank the noble Baroness, Lady Chapman, for the comments that she made. I will say only that if she has a chance to engage with us, she will see that the code of practice will be detailed and there will be written policies. I do not believe we have suggested using ACAS as a process for managing organisations that do not pass tips on in full as they should; instead, it goes through the employment tribunal system. Whether that is run by ACAS I do not know, but we would certainly be delighted to engage on how the process should work. But we want to keep this quite light-touch. The last thing we want to see is employees having to go through complicated and cumbersome legal processes for something that should involve pretty immediate redress. If the noble Baroness has the opportunity to go through the legislation, she will see the detail that is there for relatively rapid redress processes.

To conclude, bringing forward these new regulations will protect millions of workers, among them many of the lowest paid across a wide variety of sectors, and give them an avenue to seek remedies. Consumers will rest assured that the tips they leave are going, as intended, to reward the good service and hard work of staff rather than lining the pockets of bosses. Additionally, those business that are already doing the right thing—passing on tips to workers in full without deductions—will be confident that they are not at risk of being undercut by their less reputable competitors, which is a very important point.

These new measures are backed by government evidence and analysis, with a full impact assessment of the measures having been published. Continued stakeholder engagement will ensure that we do not inadvertently disallow arrangements that are considered fair in some workplaces, as I have mentioned, meaning that we can continue to promote fairness for both businesses and their staff.

The Government are pleased to support these new measures and we are glad to see the level of support for them across the House. I have greatly appreciated that during today’s debate. All waiters and other restaurant staff will look to us, I hope, as a beacon of fairness as we bring this legislation into force. I look forward to continuing to work with my noble friend Lord Robathan to support the passage of the Bill.