Employment Bill [Lords]

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The Chairman: Order. We are getting into the issue of tipping generally. It would be useful if the hon. Gentleman could bring the debate back to its relationship with the national minimum wage.
Mr. Swire: Indeed. I shall therefore call them gratuities.
John Hemming: Does the hon. Gentleman agree that bringing in such a change would make a distinction between the service charge, which is really a way of hiding part of the price of the food, and a gratuity, which is a bonus for extra work?
Mr. Swire: Absolutely right. A gratuity is a gratuity. As I said, it should reward service that is way and above that which one would normally expect to receive.
Mr. Binley: I am getting a little concerned about the anti-business attitude in all this, and I want to defend the people who act properly with their staff. Many of those who levy a service charge, whether or not my hon. Friend agrees with that, act properly towards their staff and ensure that they receive it. There is a difference between a service charge, which embraces the whole of the operation, and a gratuity to a given waiter or waitress. We have to be careful that we are not seen as being seen as anti-business.
Mr. Swire: I do not agree with my hon. Friend. I have never understood why one needs to pay any kind of charge to sit at a table in a restaurant when one is going to pay for one’s food. A gratuity is for service, and it should go to the person who is serving. That is why I increasingly pay in cash at the end of my meal to ensure that it goes to the waiter serving me and is not used by the proprietor to get that person up to the level of the minimum wage.
Mr. Swire: I agree. I do not believe that any well run business—I have many in my constituency and there are many up and down the country—should have to resort to any underhand way of paying their staff through the gratuities left by their customers. That is not anti-business—it is pro-employee and pro-well run businesses.
John Hemming: I therefore assume that the hon. Gentleman would agree that suggesting to businesses that they make it clear what the price list on the menu means is not anti-business but good for business because it provides clarity.
Mr. Swire: I agree. We are very dependent on tourists in the south-west—we have 15 million of them. No doubt many more would come if the trade unions did not ban them from trade union homes in the south-west, but we have to overcome that. Of course we want tourists, not all of whom are English or speak English as their first language. They might come to London, or wherever, and not understand about service charges and whether they have to tip. It is a complete mess. In no sense is this proposal anti-business—it is pro-business and good for well run businesses. Gratuities should not be used as a supplement in order to pay the minimum wage.
2.45 pm
Mr. McFadden: The new clauses cover an issue that we all care about and which has come into increasing prominence over the last couple of years. The minimum wage, which we have discussed during consideration of the Bill, has evolved over time. For example, the situation for 16 and 17-year-olds was changed a few years ago. We have discussed changes with regard to voluntary workers and expenses, and the law has changed with regard to work experience and so on.
This is one such change, and it is something that I have wanted do since I became employment relations Minister. In July, I was pleased to announce that the Government would change the law to ensure that tips could no longer count to make up the minimum wage. That is profoundly within the instincts of the British people, and I was glad to make that announcement.
When we leave a tip in a restaurant, however it is divided among the staff—I might come on to that—we expect that it will be additional to the minimum wage and will go to the staff who served us, on top of their pay. It should not be used to make up the minimum wage.
The hon. Member for Preseli Pembrokeshire said that some businesses operate a system in which they guarantee the minimum wage, although some of it will be made up from tips. At the moment, that is not illegal if the tips or gratuities are processed through the payroll. Things partly depend on that. The change would ensure that all tips were additional to pay. We have announced that, and we believe it is the right thing to do.
Under the law, all workers are entitled to the minimum wage. The measure will deal with the situation raised by the hon. Gentleman so that the practice of using tips to make up the minimum wage will no longer be possible. That is why we announced the change several months ago.
There is a question about what happens to tips. It is more difficult to legislate on that, but we would all like to achieve transparency. In the end, the money is ours as customers—as the hon. Gentleman said, we can choose to leave or not leave a tip, or to leave a smaller one should we wish. We must work with the hospitality industry to promote transparency over what happens to tips. That is equally as important as changing the law to ensure that tips are additional to the minimum wage.
Mr. Swire: I risk your wrath, Mr. Caton, but I agree with what the Minister says. I am sure that he and all members of the Committee can give examples of when, after an indifferent meal, they did not seek to reward that indifference, although they wanted to reward the waiter who provided first-class service.
Mr. McFadden: That is a fair point. For the purposes of the Government and the law, the critical point is that in future tips should be in addition to the minimum wage. As customers, we expect that to happen with our tips. I have not carried out a scientific poll, but I suspect that most customers would not like to think that their tips were making up the minimum wage.
John Hemming: How is this going to be implemented in law?
Mr. McFadden: The hon. Gentleman is anticipating me. I have explained how the regulations work at the moment: a service charge, tip, gratuity or cover charge that is paid to the worker through the payroll may, legally, count towards payment or part-payment of the minimum wage. We are seeking to address that issue.
At the end of July, we announced our intentions, and I am pleased to tell the Committee that my Department is preparing a consultation document, which we shall publish in a matter of weeks. We shall consult the hospitality industry on precise implementation. We have heard various comments today about service charges, gratuities, tips and so on—it is true that there are all those different practices. When making such a change, it is right to consult the industry.
I also pay tribute to the people who campaigned for the change. The campaign has increased substantially over the past couple of years. We have heard a lot of talk about trade unions in our deliberations. I do not want to go over all that again, but a number of unions campaigned on the issue and, in doing so, were campaigning for something very much in line with public instincts. Our intention is to consult on exactly how to do this, but let me leave no doubt about the Government’s intentions to do it, which will be made clear in a document in the next few weeks.
As for the amendments, we do not need to make the change through primary legislation. We can do it through the minimum wage regulations, which are debated in the House every year. We have a route forward, having consulted with the industry. There is substantial unity in Committee—across all three parties—that the issue is one that we want to address. As I said, the Government have announced a firm intention to do so. There is no need to do anything through the Bill or primary legislation. Fairness on tips unites us. On that basis, I hope we can move forward.
John Hemming: Obviously the issue can be dealt with through secondary legislation. Therefore, there is an argument for new clause 1 to be withdrawn, but new clause 7 would create a duty on the Government to act as they intend, which, perhaps, would give legislative cover. That would not be subject to judicial review, which secondary legislation can be. On new clause 1, however, I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.

New Clause 2

Enforcement of unpaid Employment Tribunal awards
‘(1) The Secretary of State shall by order make regulations to enforce the recovery, on behalf of the claimant, of any Employment Tribunal monetary award not fully paid by the respondent within forty-two days of the date on which judgment was sent to the parties, and for the recovery of all associated enforcement costs from the respondent.
(2) Regulations made under subsection (1) shall—
(a) identify organisations responsible for the recovery of awards under subsection (1),
(b) provide powers enabling organisations identified under paragraph (a) to recover awards and associated costs as set out in subsection (1),
(c) provide for the regulation of organisations operating under this section.
(3) Regulations under subsection (1) shall be made by statutory instrument.
(4) No regulations may be made under subsection (1) unless a draft of the instrument containing the regulations has been laid before and approved by a resolution of, each House of Parliament.’.—[John Hemming.]
Brought up, and read the First time.
John Hemming: I beg to move, That the clause be read a Second time.
Unless we get a more substantive response from the Government, the new clause is a key issue that will require a Division of the Committee.
In essence, the new clause looks at what would happen if someone did not pay the employment tribunal award. As it stands, there would then be a civil enforcement process. We will come to the fact that equality of arms is the key issue. A lot of the people who are trying to get money that has not been paid to them are in a challenging position, having to go to a civil court and go through that process. The new clause would put a duty on the Government to produce secondary legislation. We are not trying to specify in minute detail how that should be done—I would not be surprised if this proposal had been drafted by Citizens Advice, but I am not 100 per cent. certain, not having been involved at that stage.
People should recognise that there is a real problem here. The Government need to act. This is the right vehicle to create regulations enabling the enforcement process to be handled, so I would like to press new clause 2 to a vote, unless the Government pull some legislative rabbit out of the hat.
Mr. Djanogly: I put my name to the new clause on a probing basis, because important questions raised in the other place have not yet been answered. The Government say that they recognise that there is a need to address the recovery of awards, but they do not believe that direct enforcement is the way to deal with such claims. Will the Minister tell us what form enforcement should take instead?
The new clause deals with a problem that is often faced by those at the poorer end of the employment spectrum. It was originally tabled in the other place by Baroness Turner at the request of Citizens Advice, with the aim of dealing with the problem of non-payment of employment tribunal awards by rogue employers.
The current system is long and complex, and sometimes prohibitively expensive for those who have not been paid their award. There are, on average, some 15,000 employment tribunal awards made in favour of claimants each year, but Citizens Advice estimates that more than one in 10 does not receive their award. Citizens advice bureaux dealt with more than 1,000 cases last year alone, and Citizens Advice research also highlights the fact that nearly half those unpaid awards were for less than £2,000 and almost a quarter were for less than £1,000.
For those vulnerable workers affected, navigating the county court or High Court enforcement process can be a daunting challenge that involves a lot of time, stress and cost relative to the value of the award. Citizens Advice notes that many of those affected simply do not take their claims forward, that the impact on them can be devastating and that the total loss involved may be as much as £7 million per year. Rogue employers’ knowledge of the complexity of enforcement provisions means that they could see it as a commercial decision to avoid paying out, because, on balance, they might save more than they would be forced to pay out in the longer term.
The Government have said that they commissioned their own inquiry on this area, on the back of Citizens Advice. Will the Minister tell us what format the inquiry has taken and what results it has produced to date, bearing it in mind that the inquiry has been running at least from May?
There is a wrong here that needs to be recognised. I am interested to hear the Minister’s reaction to the question whether the new clause is the right way to go about that.
Michael Jabez Foster: I would like to know what the problem is. At present, this is a straightforward issue of the judgment—the award—being registered in the county court and then enforced. There are problems with county court enforcements: often the employer does not have the money; it is a matter of the resources not being there. I cannot see how a new system—a new bureaucracy of enforcement—would help.
I want to discover how this new organisation would operate under the new clause. How would it differ from the current, relatively simple process of attaching an affidavit to the award and registering it in the county court? That is all that happens at the moment. Then there is the enforcement problem to consider. Is it being suggested that the rules under the new clause should be enforced in respect of criminal proceedings, such as an award in a magistrates court? What is the logic behind the new clause that would make its new methods of enforcement different from those now available in the county court?
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