Workers to get legal rights on payments of tips

New requirements on employers to clearly display their policy on tips and service charges.

The Irish Government has approved the creation of a new law to protect employee tips and give customers greater transparency.

The Tánaiste and Minister for Enterprise Trade and Employment Leo Varadkar, TD, today (27 October 2021) received Government approval to draft a law that will give new rights to employees, prohibiting the use of tips and gratuities to “make up” contractual rates of pay.

“This new law will, for the first time, give workers legal protections over tips”

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.

All electronic tips must be distributed fairly and in a transparent way.

“This new law will, for the first time, give workers legal protections over tips,” Varadkar said. “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.”

Electronic tips

The aim of the Payment of Wages (Amendment) (Tips and Gratuities) Bill is to: 

  • Provide clarity on the meaning of tips, gratuities and service charges
  • Place tips and gratuities, but not service charges, outside the scope of a person’s contractual wages
  • Oblige employers to display prominently their policy on the distribution of both cash and card tips
  • Oblige employers to distribute fairly, equitably and in a transparent manner, tips that are received in electronic form i.e. through debit or credit cards or smart phones

An important element of the new law will be to 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 new law builds on the suite of legal rights that 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.

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

John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.