Employment Rights Amendment (Allocation of Tips) Bill

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ensure that tips, gratuities and service charges paid by customers are allocated to workers.

BE IT ENACTED by the King’s Most Excellent Majesty, by and with the advice and consent of the Lords, and Commons, in this present Parliament assembled, and by the authority of the same, as follows –

Section 1 – Purposes of the Bill

(1) To ensure that tips, gratuities, and service charges paid by a customer are received by employees from their employer.

(2) To allow for the use of other programmes such as Independent Tronc operators for the fair division of tips, gratuities, and service charges.

(3) To allow for employees who have not been paid tips, gratuities, or service charges to take their employer to the Employment Tribunal.

Section 1 – Tips, Gratuities, and Service Charges

(1) Insert after Section 27B of the Employment Rights Act 1996 the following–

Part 2B –
27C – Qualifying Tips, Gratuities, and Service Charges
(1) Qualifying tips in this Part is defined as–
(a) employer-received tips; and
(b) worker-received tips which–
(i) are subject to employer control; or
(ii) are connected with any other worker-received tips which are subject to employer control.
(2) Employer-received tip in this Part is defined as an amount paid by a customer of an employer by way of a tip, gratuity, or service charge which is–
(a) received upon its payment or subsequently by the employer or associated person; or
(b) is received upon its payment by a person under a payment arrangement made between the employer and that person.
(3) Worker-received tip in this Part is defined as the amount paid by a customer of an employer by the way of a tip, gratuity, or service charge which is–
(a) received upon its payment by a worker of the employer; or
(b) not subsequently received by the employer or an associated person.

Section 2 – How tips, gratuities, and service charges must be dealt with

(1) Insert after section 27C of the Employment Rights Act 1996 the following–

27D –How tips, gratuities, and service charges must be dealt with
(1) An employer must ensure that the total amount of the qualifying tips, gratuities and service charges paid at, or otherwise attributable to, a place of business of the employer is allocated fairly between workers of the employer at that place of business.
(2) Where a worker is allocated an amount of employer-received tips in accordance with subsection (1), that amount is payable to the worker by the employer.
(3) In determining what would be a fair allocation of qualifying tips, gratuities and service charges under this section or section 27E (non-public places of business), regard must be had to the relevant provisions of any code of practice issued under this Part.
(4) See also sections 27E (non-public places of business) and 27F (independent troncs).
27E – Non-public places of business
(1) This section applies where—
(a) qualifying tips, gratuities and service charges are paid at, or are otherwise attributable to, a non-public place of business of an employer (the “non-public tips”), and
(b) the employer also has one or more public places of business.
(2) The employer may comply with the requirement in section 27D(1) to ensure that the total amount of the non-public tips is allocated fairly between workers of the employer at the non-public place of business by instead ensuring that the total amount of the non-public tips is allocated fairly between both—
(a) workers of the employer at the non-public place of business, and
(b) workers of the employer at one or more public places of business of the employer.
(3) In this section—
(a) non-public place of business means a place of business that is not a public place of business; (b) “public place of business” means a place of business where interaction between—
(i) customers of the employer, and
(ii) workers of the employer, that occurs wholly or mainly face-to-face.

Section 3 – Independent Troncs

(1) Insert after Section 27E of the Employment Rights Act 1996 the following–

27F – Independent troncs

(1) In this section relevant tips means the qualifying tips, gratuities and service charges that—
(a) are paid at, or are otherwise attributable to, a place of business of an employer, and
(b) are paid during a reference period.
(2) Where—
(a) the employer makes arrangements for the total amount of the relevant tips to be allocated between workers of the employer at the place of business by an independent tronc operator, and
(b) it is fair for the employer to make those arrangements,
(c) the employer is to be treated as having ensured that the total amount of the relevant tips is allocated fairly between workers of the employer at the place of business in accordance with section 27D(1).
(3) Where—
(a) the employer makes arrangements for a part of the total amount of the relevant tips to be allocated between workers of the employer at the place of business by an independent tronc operator, and
(b) it is fair for the employer to make those arrangements,
(c) the employer is to be treated as having ensured that that part of the total amount of the relevant tips is allocated fairly between workers of the employer at the place of business in accordance with section 27D(1).
(4) In determining whether it would be fair for an employer to make the arrangements mentioned in subsection (2) or (3), regard must be had to the relevant provisions of any code of practice issued under this Part.
(5) Section 27D(2) does not apply to an amount which—
(a) by virtue of subsection (2) or (3), is treated as having been allocated fairly between workers, and
(b) is payable to the worker by the independent tronc operator.
(6) For the purposes of this section “an independent tronc operator” is a person who the employer reasonably considers to be operating, or intending to operate, independently of the employer, arrangements under which—
(a) the total amount of qualifying tips, gratuities and service charges subject to the arrangements is allocated between workers of the employer at the relevant place of business by the person,
(b) such allocated qualifying tips, gratuities and service charges are payable to such workers by the person or by the employer (or partly by the person and partly by the employer),
(c) amounts payable to workers by the person in accordance with paragraph (b) are not subject to unauthorised deductions by the person, and
(d) all payments made to workers in accordance with paragraph (b) are payments to which paragraph 5(1) of Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) (payments disregarded in the calculation of earnings)—
(i) applies by virtue of the payments meeting the condition in paragraph 5(3) of that Part, or
(ii) would apply by virtue of the payments meeting the condition in paragraph 5(3) of that Part if the modifications in subsection (7) were made to paragraph 5 of that Part.
(7) The modifications are—
(a) each reference to a “secondary contributor” is to be read as a reference to an “employer”;
(b) each reference to an “earner” is to be read as a reference to a “worker”.
(8) The Secretary of State may by regulations—
(a) amend the definition of “independent tronc operator” in this section in consequence of the making of social security contributions regulations, and
(b) consequentially amend any other provision of this Part.
(9) In this section—
(a) reference period means a period of at least one day, as determined by the employer from time to time;
(b) social security contributions regulations means any regulations making provision related to social security contributions of employers or workers;
(c) unauthorised deduction means a deduction that is not required or authorised to be made by virtue of a statutory provision.

Section 4 – Enforcement

(1) Insert after Section 27J of the Employment Rights Act 1996 the following–

27K – Complaints to the Employment Tribunal About Tips
(1) A worker may present a complaint to an employment tribunal that the worker’s employer has failed to comply with Section 27D (how tips etc must be dealt with).
27L – Determination of Complaints About Tips
(1) If an employment tribunal finds a complaint under section 27K well founded—
(a) it must make a declaration to that effect, and
(b) it may in the case of a complaint under section 27K(1), make an order requiring the employer to deal with qualifying tips, gratuities and service charges that were paid at, or were otherwise attributable to, a place of business of the employer in accordance with this Part.
(2) An order made under subsection (1)(b) may in particular—
(a) require the employer to revise an allocation made by the employer under section 27D;
(b) make a recommendation to the employer regarding that allocation;
(c) require the employer to make a payment to one or more workers of the employer in accordance with this Part (including a worker who is not the complainant).
(3) A recommendation made under subsection (2)(b) is not binding on an employer, but is to be admissible in evidence in proceedings before an employment tribunal; and any provision of the recommendation which appears to the tribunal to be relevant to any question arising in the proceedings is to be taken into account in determining that question.
(4) An order made under subsection (1)(b) following a complaint presented by a worker does not prevent a different worker from presenting a complaint under this Part in relation to the same employer or the same qualifying tips, gratuities and service charges.

Section 5 – Short Title, Commencement and Extent

(1) This Act may be cited as the Employment Rights Amendment (Allocation of Tips) Act 2023.

(2) This Act comes into force 6 months after Royal Assent. (3) This Act extends to the United Kingdom.

(a) This Act extends to Scotland if the Scottish Parliament passes a motion of legislative consent; (b) This Act extends to Wales if the Welsh Senedd passes a motion of legislative consent; (c) This Act extends to Northern Ireland if the Northern Irish Assembly passes a motion of legislative consent.

(3) This Act extends to England.

This Bill was written by the Rt. Hon. Lord of Melbourne KD OM KCT PC, Shadow Secretary of State for Work and Welfare, on behalf of the Official Opposition.

This Bill takes inspiration from the Employment (Allocation of Tips) Act 2023

of the Parliament of the United Kingdom.

Opening Speech:

Deputy Speaker,

How many times have you been hit with a service charge, or forced gratuity when ordering food at a restaurant, or getting delivery, or getting a rideshare, and then wondered “does the employee actually get this?”

Well this Bill seeks to solve that.

This is estimated to put some £200,000,000 back into the pockets of hospitality workers alone! With the cost of living crisis ongoing, that could seriously benefit some of our hardest working and lowest paid workers.

If you pay someone a tip, or you pay a service charge, then that money should be going into the hands of the worker, just like you expect it to. But with the proliferation of card payments, it has become harder and harder to track whether your tips go straight into the hands of the employee.

Preventing business owners from stealing the hard earned tips of employees is an important aspect of this Bill, and this opens up the ability of employees to take their employer to the Employment Tribunal if they are not being paid tips fairly.

It also allows for the utilisation of 3rd party independent troncs to manage the distribution of tips, service charges and gratuities.

While it seems lengthy and convoluted, this really is quite a simple Bill that will deliver better outcomes for British hospitality workers, an industry I care deeply about, and as such I hope that the House may find favour in lending their support for this Bill.

This division will end on 13th November at 10pm GMT.