Employment (Allocation of Tips) Bill

Lord Robathan Excerpts

2nd reading
Friday 3rd March 2023 Lords Chamber

Moved by

[Lord Robathan]

That the Bill be now read a second time.

[Lord Robathan (Con)]

My Lords, this is a Bill entirely about fairness. Indeed, a Member of the other House said to me only this morning, “What is there not to like?”. It was started in the other place by my honourable friend the Member for Watford, Dean Russell, and then continued—for reasons which I will not bore you with—by my honourable friend the Member for Ynys Môn, Virginia Crosbie. What the Bill does is quite simple: it creates a legal obligation on employers to pass on tips, gratuities, service charges—for ease of reference, I shall refer to all these as “tips”—to employees in full. The only deductions permitted are those required or permitted under other statutory provisions, specifically tax law.

Which of us has not wondered, or indeed asked, a waitress or waiter whether that person gets the extortionate service charges that often end up on the end of our Bills? We do not expect businesses to take a slice of anything we pay for service, so this Bill will create a level playing field for businesses that already pass on tips to workers in a fair and transparent way. At the core of the Bill is the creation of a legal obligation for employers to distribute all tips to workers without any deductions; this includes mandatory and discretionary service charges which are added automatically on to customers’ Bills by some hospitality venues. When customers pay service charges, they—we—expect them to go to workers in full, and they jolly well should.

Ensuring that tips are passed on to workers in full, with no deductions by employers, could make a real difference to workers’ incomes. We are talking typically about workers in hospitality such as restaurants, but it would also apply elsewhere; for instance, in taxi services such as Uber, croupiers in casinos or hairdressers. Where employers receive tips directly from customers or have control or significant influence over the distribution of tips which workers receive directly, the Bill will create that legal obligation for them to distribute those tips to workers in a fair and transparent manner. The obligation will attach to the total amount of the qualifying tips paid at, or otherwise attributable to, a place of business of the employer.

To clarify, the Bill does not cover tips which employers do not receive or have control or significant influence over. For example, if workers receive cash tips, perhaps put in a physical pot, and divide them between themselves without any control or significant influence from the employer, those tips are not affected by the Bill. It will not interfere with existing tipping arrangements where employers do not influence or make deductions from tip allocations.

It is important that we retain flexibility for employers to choose how to distribute tips so long as that distribution is fair. Some employers may choose to use a tronc system to distribute tips—I actually knew what a tronc system was, but, for clarity, it 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 who are known as a “tronc master” or a “tronc operator”; that person is often, in a restaurant for instance, the head waiter. The Bill does not seek to regulate the operators of independent tronc systems, although the employer will need to be satisfied that it is fair overall to make arrangements for distribution through a tronc.

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, gratuities and service charges, 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 certain tronc arrangements, is fair, and the code of practice will consider some of the factors which may be relevant to fairness.

The reason for the code is to capture the nuances of fair tipping practices across and within sectors. We need to ensure that we put in place a framework that appreciates the differences from business to business and allows flexibility. However, to reassure noble Peers, there will be a full consultation on the code with subsequent approval by both Houses—or not, of course.

Transparency is a crucial part of the Bill and information plays a significant role. The Bill creates an obligation on employers to have a written policy on dealing with tips, which must be made available to all workers. In order for workers to understand whether their tips have been distributed fairly, the Bill also creates a new right for workers to make a request for information relating to their individual tipping record and the overall amount of tips that the business has received in a given time period. This does not add any onerous obligations or regulations on an employer or business—apart, one might say, from writing a policy—for most employers will already have a system in place for the fair distribution of tips.

The Bill will be enforced by workers through the employment tribunal system, and provides tribunals with remedies and situations where an employer has made deductions from tips or not allocated tips in a fair and transparent way. For general knowledge, I point out that the majority of employment disputes are settled before they reach an employment tribunal, and we expect referrals to such a tribunal under the Bill to be relatively rare or unusual.

If an employer does not allocate tips fairly between workers, the employment tribunal can order the employer to revise any allocation of tips that it has previously made, recommend that the employer deals with tips in a certain way or make a payment to a worker or a number of workers of the employer, so that they receive the tips that they should have received. It might also compensate workers for any related financial loss attributable to a breach of these provisions by up to £5,000.

I hope this gives an overview of the Bill and the provisions within it. As my honourable friend down the other end said, “What is there not to like?” Both parties opposite, Labour and the Liberal Democrats, raised no problems with the Bill during Committee in the Commons—they raised a few issues, but not real problems—and support the Bill.

I hope noble Lords from all sides of the House will join me in helping the Bill succeed. It is an opportunity to bring back change that will positively impact those businesses that are already doing the right thing and, especially, those workers who receive tips. I beg to move.

--- Later in debate ---

[Lord Robathan (Con)]

My Lords, I apologise to Members present because I should have declared an interest at the beginning, although admittedly it is over half a century out of date. When I was at school, I did a bit of waiting, though not much, and I remember the joy that I had when someone left a £5 note—which was worth something in those days—on the table. My children, who are in their early 20s, have done a bit of waiting more recently. They got paid, of course, but they also got tips, and they were very happy with those.

I should warn my noble friend Lady Berridge and the noble Lord, Lord Mitchell, that there will most certainly be a great deal of resistance from our excellent waiting staff in the Peers’ Dining Room should they wish to take up their past careers in waiting, especially if the noble Lord can get as much tipping as he used to get in New York.

I thank my noble friend the Minister for signalling the Government’s continuing support for the Bill and for answering most of the questions.

I would like to refer to three points that were raised. First, the noble Lord, Lord Mitchell, raised the question of agency workers. We should be aware—I hope the code of practice will be—of being too prescriptive on how much an employer pays either his own staff or agency workers, because I do not think that is really up to us to determine.

Secondly, on credit cards, personally I have a rather ordinary little credit card. I did a bit of research and apparently the charges on that would be something over 1%. Of course, if you have a gold Amex card—I do not know whether anyone in this place does—I understand it goes as high as 3%. That is surely up to the person who has the gold card. All these credit card charges are already discounted by restaurants and other places. Those who already pay the whole service charge do not in general discount it and take money out for the credit card charges, which would probably be more complicated than it was worth.

Thirdly and finally, I agree with my noble friend Lord Bourne and the noble Lord, Lord Browne, that it is rather sad—I will put it no more strongly than that—how long it takes to get a very simple bit of legislation through Parliament.

I hope noble Lords on both sides can agree that this is an important, if small, piece of legislation which would ensure fairness and transparency for both workers and employers. This is an opportunity to increase consumer confidence, which we have all heard about, create a level playing field for businesses and help ensure that hard-working individuals—often, as has been pointed out, the lowest paid—get the money they have been given and deserve for their work.

Bill read a second time and committed to a Committee of the Whole House.

Employment (Allocation of Tips) Bill

Lord Robathan Excerpts

Order of Commitment discharged
Monday 27th March 2023 Lords Chamber

Moved by

[Lord Robathan]

That the order of commitment be discharged.

[Lord Robathan (Con)]

My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.

Motion agreed.

Employment (Allocation of Tips) Bill

Lord Robathan Excerpts

3rd reading
Friday 21st April 2023 Lords Chamber

Moved by

[Lord Robathan]

That the Bill do now pass.

[Lord Robathan (Con)]

My Lords, this is a very simple Bill and the issue is one of fairness. I am very keen that there should be no extra and unnecessary regulation; the chances of extra bureaucracy are negligible. Similarly, we do not need to worry in any way about the likelihood of great costs, as they are also negligible.

Most businesses already allocate tips fairly to their staff, but, regrettably, a minority have not done so. That gives the staff, who are often among the least well-paid in the hospitality sector—waiters, for instance, and others, stretching beyond the hospitality sector, but in particular waiters—the opportunity to insist that they are given the service charge that many of us in restaurants pay whenever we go to a restaurant, so they get the tips rather than the money going to the profits of perhaps a big company. This does not happen that much but does happen a bit, and we need to make sure it does not happen at all. I beg to move that this Bill do now pass.

[Baroness Blake of Leeds (Lab)]

My Lords, I start by congratulating the noble Lord, Lord Robathan, on sponsoring this important Bill, as he has outlined. I also thank Virginia Crosbie, the Member for Parliament, for stepping in to take up the discussions in the other place. As has been said, this is indeed an important issue; the Bill will support some of the lowest-paid workers across the country, and I am pleased to recognise the cross-party support it has received during its passage.

I will also reflect the comments my noble friend Lady Chapman made at Second Reading. This is a very welcome Bill; it may not deal with absolutely everything on the topic, but when the Government are supporting a sensible agreement, we should acknowledge that. We do recognise that there are probably some more details that need to be ironed out to ensure that the intent of the Bill is carried forward. I also add my thanks to everyone, including officials, who has supported its passage in both Houses.

--- Later in debate ---

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, I thank my noble friend Lord Robathan for bringing the Employment (Allocation of Tips) Bill through the House. I agree with him on many things, and particularly on this. I also thank noble Lords from across the House, particularly the noble Baronesses, Lady Blake and Lady Chapman, who spoke in recent debates, for their valuable contributions on the Bill during its passage.

The Government are very pleased to support this important Bill, which deals with tips, gratuities and service charges, which I will subsequently refer to as “tips”. The measures in the Bill will protect millions of workers. We believe that tips should be passed on in full and without deduction to workers. Indeed, many across this House and across the country would regard that as common sense. Tips left by customers are intended to reward the hard work and excellent service of staff rather than topping up the revenue of businesses. The Government are therefore pleased to support the changes made through this legislation and to hear support for it across this House.

I will restate what these measures will do once legislative passage is secured, and what they will not do. Employers will be prevented from making any deductions when distributing tips to their employees, with the exception of those already required or permitted—for example, by tax law. Existing legislation already sets out how tips should be treated for the purposes of tax and national insurance, as the requirements differ depending on whether the payments are made by cash or card and on whether tips are paid directly to workers or are processed and distributed by the business or an independent tronc. No changes are proposed to these tax laws. The majority of businesses, those who already do the right thing in passing on tips in full to their employees, will be largely unaffected. The Bill will ensure a level playing field.

On the statutory code of practice on tipping, when considering the distribution of tips in their organisation, employers will be required to have regard to the statutory code of practice, which will promote fairness and transparency in relation to the distribution of qualifying tips that will include various example scenarios. Employment tribunals will also be required to have regard to the code of practice where relevant in the event that a worker takes a claim against their employer on the grounds of unfair or improper tipping policy or procedure.

We expect that these tipping measures and the code of practice will come into force about a year after Royal Assent is granted to the Bill. This will ensure time for adequate stakeholder input, including a full consultation period, before the final version is brought before both Houses of Parliament for approval. I stress that, from conversations we have had with the industry, it is important that the variabilities to ensure fairness are properly considered, so a proper consultation period is necessary and right.

To conclude, bringing forward this new law will protect millions of workers, among them many of the lowest paid, and give them an avenue to seek remedies. Consumers will be able to rest assured that the tips they leave are going, as intended, to reward the good service and hard work of staff, rather than boosting the revenues of businesses. Additionally, businesses that are already doing the right thing—passing on tips to workers in full without deduction—will be able to be confident that they are not at risk of being undercut by their less reputable competitors.

The Government are pleased to support these new measures and have been glad to see the level of support for them across both Houses during the passage of this Bill. The Government are committed to fairness and to providing opportunities for hard-working people, which is exactly why we are supporting multiple pieces of employment regulation, including this one, on tipping. Ultimately, this Bill is about granting fairness to service workers, who for too long have not had protection from bosses taking tips, and about making sure that customers’ intentions to recognise good service are met. I am personally very pleased to support these new rules. I again thank my noble friend Lord Robathan for his sponsorship of the Bill as it has moved through the House. I also thank my honourable friends Dean Russell and Virginia Crosbie for their sponsorship in the other place and their hard work in this area.

[Lord Robathan (Con)]

My Lords, it is nice not to be controversial for a change and to have the agreement of the Liberal Democrats. I thank the noble Baroness, Lady Walmsley—I am not sure if it is a compliment or not, but never mind. I am delighted that there is no opposition. It is a very straightforward Bill, the Government support it and I know of nobody who does not. I, too, thank the officials who have worked on this, the Minister, those who have supported it from the other side of the House and my honourable friends Dean Russell and Virginia Crosbie in the other place. Frankly, I do not have anything else to say, for a change. I beg to move that this Bill do now pass.

Bill passed.