New law to stop employers counting tips as part payment for staff

Employers will no longer be permitted to use tips and gratuities to ‘make up’ contractual rates of pay, when a new law comes into place.

Government approval has today been given to draft a law that will give new rights to employees in terms of pay.

There will be new requirements on employers to clearly display their policy on how both card and cash tips, gratuities and service charges are distributed. The legislation will attempt to ensure all electronic tips distributed fairly and in a transparent way.

“This new law will," Tánaiste Leo Varadkar said, "for the first time, give workers legal protections over tips. It will mean that any tips received cannot be counted towards an employee’s basic pay, they must be counted as additional and separate.

“I know many people are sometimes unsure how or if tips and service charges are distributed when paying for a meal, for example, especially when paying by card or phone. Once this law is enacted, all employers will be required to show clearly how tips and service charges are dealt with in a business. This will provide clarity for both customers and staff.

“Most establishments already treat their employees fairly with regard to tips, so for many it will mean no change other than having to display their policy clearly.”

The new law - called The Payment of Wages (Amendment) (Tips and Gratuities) Bill - will give employees a legal entitlement to receive tips and gratuities paid in electronic form (i.e. by debit or credit card) with a provision that these tips and gratuities should be paid out to workers in a fair, transparent and equitable manner. A fair and equitable distribution will be context specific and is likely to take into account matters such as staff hours, busy and quiet periods, a worker’s role in service delivery, customs and practice etc.

Payment of tips and gratuities by electronic means, in contrast to cash tips that are paid directly to the worker, means that the employer is in control of how these tips and gratuities are distributed. The electronic record generated by this payment method will support and facilitate inspections by the Workplace Relations Commission (WRC) in the event of a complaint being made. How cash tips are distributed will be required to be included in an employer’s publicly displayed policy on the management of tips and gratuities.

This proposal had been commenced in 2019 but had fallen following the general election of February 2020.