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News & Events

Tánaiste publishes law to give customers clear information on where their tips go

Tips must be paid out to workers in fair and transparent manner

Businesses must display policy on how tips and service charges are distributed

Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar TD, today published a new law which will give customers clear information on where their tips and service charges go and prohibit the use of tips to ‘make up’ contractual rates of pay.

The Payment of Wages (Amendment) Bill will require employers to clearly display their policy on how tips, gratuities and service charges are distributed. All electronic tips received by the employer must be distributed fairly and in a transparent way and this will be inspected through the Workplace Relations Commission (WRC). The distribution obligations will not affect businesses where tips are managed by employees themselves, for example under a ‘tronc’ system.

An employer may take into account certain factors when deciding how to distribute tips, including the seniority or experience of an employee, the value of sales generated by them and the number of hours worked. All employees must be consulted on the policy that is introduced. 

The Tánaiste said:

“The vast majority of employers do their best to ensure tips are distributed fairly among staff. This law will make sure that is the case across the board, giving employees a new legal right over their tips.

“For customers then, I know most people are unsure about where their tips go and what the difference between a tip and a service charge is. From now on, establishments will be required to clearly show how everything is distributed and where it goes. This goes for whether you pay by cash or card.

“An important requirement of the new Bill is that the employer must provide a statement to workers showing the amount of electronic tips obtained in a period and the portion paid to the individual employee for that particular period. This will ensure transparency.

“This is one of five new workers’ rights I am bringing in as Minister this year. I am determined to make better working conditions a legacy of the pandemic.  I firmly believe that this is necessary to recruit and retain the staff we will need to drive our enterprise economy forward.  We will, of course, be sensitive to issues such as cost and competitiveness.”

The Payment of Wages (Amendment) (Tips and Gratuities) Bill will:

  1. Place tips and gratuities outside the scope of a person’s contractual wages;
  2. Oblige employers to display prominently their policy on the distribution of both cash and card tips and service charges. The customer will be better informed about how tips are treated;
  3. Oblige employers to distribute fairly and transparently all tips that are received in electronic form i.e. through cards or smart phones; 

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.  Businesses will be required to display a ‘Contract Workers Tips and Gratuities Notice’ stating how tips, gratuities and service charges are distributed amongst ‘contract’ or platform workers, such as those working in delivery services.

This new law builds on the suite of legal rights the Government is introducing to protect workers, which includes the Sick Leave Bill, the Transparent and Predictable Working Conditions Directive and the Right to Request Remote Work. 

Notes to Editors

The Bill contains nine sections as follows:

Section 1 and 2 provides for definitions of tips, gratuities and service charges.

Section 3 provides for the insertion of new sections 4A to 4D in the Payment of Wages Act 1991.

4A relates to the Minister making regulations to prescribe what employers or class of employers that sections 4B to 4D apply to. These sections are explained below. It also provides for the Minister to be able to prescribe by regulation an employer or a class of employers, to which sections 4B to 4D do not apply to.

4B provides for the following matters;

  • employers are required to distribute fairly and in a transparent manner, tips that are received in electronic form i.e. through debit or credit cards.
  • An employer may not retain any share of tips or gratuities received by the employer electronically, unless such retention is required by this Act, or that is fair and reasonable in the circumstances only where he or she regularly performs to a substantial degree the same work performed by some or all of the employees.
  • In considering a complaint under Part 4 of the of the Workplace Relations Act 2015 regarding whether or not a distribution of tips and gratuities to an employee is fair, an adjudication officer shall have regard to all of the factors or circumstances that he or she considers relevant, including:

(a)     the seniority or experience of the employee;

(b)     the value of sales, income or revenue generated for the business by the employee;

(c)      the proportion or number of hours worked by the employee during the pay period in which the tip or gratuity was made;

(d)     whether the employee is on a full-time or part-time contract of employment;

(e)     the role and influence of the employee in providing a service to customers;

(f)      whether the employee was consulted in relation to the manner of distribution;

(g)     whether there is an agreement, whether formal or informal, between the employer and the employee providing for the manner in which tips and gratuities are to be distributed.

  • To aid transparency of the distribution of tips, an employer must no later than 10 days from the date on which a distribution of tips and gratuities is made, give to an employee a statement in writing specifying the total amount of tips and gratuities distributed by the employer for the period to which the statement relates, and the amount of tips and gratuities distributed to the employee to whom the statement is provided.
  • An employer shall, before establishing or making a material change to its policy on the manner in which tips or gratuities will be distributed among employees, or on the way in which service charges will be treated, consult with those employees.

4C provides that an employer cannot make a deduction from an employee’s wages in respect of tips or gratuities made to, or left for, an employee, or make a deduction from an employee’s tips or other gratuities other than –

(i)    as required by this Act, by any statute or by any instrument made under statute, or

(ii)   to the extent required in order to meet costs directly arising from providing electronic modes of payment.

4D provides for an employer to display a ‘Tips and Gratuities notice’ stating whether or not tips or gratuities are distributed to and amongst employees, the manner in which they are distributed and the amounts so distributed, and also whether services charges, or any portion of them, are distributed to and amongst employees, and if so, the manner in which they are distributed and the amounts so distributed. The Minister may by regulations prescribe;

  1. the particulars of the information that shall be contained in a tips and gratuities notice, and any
  2. further or additional information relating to tips and gratuities or service charges that shall be contained in a tips and gratuities notice,
  3. the manner in which, or particular locations at which (including on a website or other online digital platform hosted by the employer or contractor, or at the place of business at which employees or workers perform their work or service), a tips and gratuities notice shall be displayed.

4E provides for similar provisions for new models of work such as platform workers who are not direct employees but their work typically attracts tips e.g. food takeaway delivery apps. The Minister shall be able to make regulations requiring certain businesses to display a ‘contractor tips and gratuities notice’ stating –

  1. whether or not tips or gratuities are distributed to and amongst contractors,
  2. where tips and gratuities are so distributed to and amongst contractors, the manner in which they are distributed and the amounts so distributed,
  3. whether services charges, or any portion of them, are distributed to and amongst contractors, and if so, the manner in which they are distributed and the amounts so distributed.

Section 4 provides for amendments to Section 6 of the Payment of Wages Act, in subsection (1), by the substitution of “section 4C or section 5” for “section 5”.

Section 5 provides for amendments to Section 3 of the Terms of Employment (Information) Act 1994, in subsection (1A) to add a new subsection (g). This means that a statement regarding the employer’s policy on the manner in which tips or gratuities and service charges are treated will become part of the core terms that a new employee is to be furnished with within 5 days of commencing employment.

Sections 6, 7 and 8 deals with enforcement and compliance issues and provides for the relevant amendments to be made to the Workplace Relations Act of 2015. This enables and authorises the Workplace Relations Commission (WRC) to carry out inspections and to take complaints regarding compliance with the new requirements set out in this Act.

Section 9 relates to Short title, commencement and collective citation. This Act may be cited as the Payment of Wages (Amendment) (Tips and Gratuities) Act 2021. The Act shall come into operation on such day or days as the Minister for Enterprise, Trade and Employment may appoint by order or orders either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or different provisions.