Varadkar: Law will force restaurants to say how tips are distributed 

The new law will strengthen the rights of employees, prohibiting the use of tips and gratuities – but not service charges – to make up contractual rates of pay. File picture

Restaurants will have to clearly tell customers how both card and cash tips, gratuities and service charges are distributed among staff under new legislation being brought forward by the Government.

Employment Minister Leo Varadkar says the aim of the Payment of Wages (Amendment) (Tips and Gratuities) Bill is to bring clarity to both staff and customers on just where the money paid goes.

The new law will strengthen the rights of employees, prohibiting the use of tips and gratuities – but not service charges – to make up contractual rates of pay.

Explaining the need for the new law, Mr Varadkar said there was anecdotal evidence to suggest employers in some places were not passing on tips and service charges to their staff.

He said the intention was to have the laws in place by next year.

Speaking at a press conference, Mr Varadkar said there would be new requirements on employers to clearly display their policy on how both card and cash tips, gratuities and service charges were 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. 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,” he said.

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, Mr Varadkar said.

“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 bill, by way of law, will place tips and gratuities, but not service charges, outside the scope of a person’s contractual wages.

Employers will be obliged to display prominently their policy on the distribution of both cash and card tips.

It will also oblige employers to distribute fairly, equitably and in a transparent manner, tips that are received in electronic form, such as through debit or credit cards or smartphones.

Legal entitlement to receive tips

Employees will be given a legal entitlement to receive tips and gratuities paid in electronic form with a provision that these tips and gratuities should be paid out to workers in a "fair, transparent and equitable manner". 

The Government says electronic payments will help the Workplace Relations Commission investigate if a complaint is made.

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A spokesperson for the Restaurants Association of Ireland said: "The Restaurants Association of Ireland welcome the Governments decision to bring forward legislation regarding tips and look forward to working with the Tánaiste's department in making the tips legislation as workable as possible for employees and business owners."

Sinn Féin senator Paul Gavan, who passed a similar law in the upper house in 2019, said any such law establishes a legal right to tips and service charges for employees.

“Any move to establish protections and transparency with regard to employee tips for workers in the hospitality and other service sectors is welcome, but such a bill will only be transformative if it establishes a legal right to both tips and service charges for employees."