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Tips – Top Questions and Answers on New Law from December 2022

For those employees who work in the hospitality, tourism or service industry in general, tips are a welcome recognition for a service or job well done. Unfortunately there has been little regulation of how tips have been regulated or dealt with under law to date. Much of recent media reporting of how tips are paid has not been reported favourably to date but that is set to change.

What is happening in December 2022?

From 1 December 2022, the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 introduces new rules as to how employers will have to share tips, gratuities and service charges amongst employees.

It will also make it illegal for an employer to use tips to form part of an employee’s basic wages.

Can you tell me some of the main points under the new Act?

In general, the Payment of Wages Act 1991 (as amended) deals with the payment of wages in Ireland and how deductions etc are regulated. An employer cannot simply deduct monies from an employees wages unless it complies with the Act. For example, an employer can only deduct monies which are prescribed by law such as a taxes or unless the deduction is set out in the employee’s contract.

  1. Under the new Act, employers cannot make a deduction from a person’s wage in relation to tips and gratuities.
  2. Electronic tips and gratuities must be distributed in a fair manner and an employee is entitled to receive a statement from their employer showing the amount of tips obtained in a particular period and how much is paid to the employee for that period. An employer cannot keep any of the electronic tips unless for example the tips are used to pay tax/bank charges which arise from the employer using an electronic form of tipping. Employers and employees should note that the amount deducted must be fair in all of the circumstances.
  3. A welcome addition under the Act is that businesses must clearly display their policy on how tips, gratuities and service charges are distributed. This will be important for customers who also wish to ensure their tips are being given to the employees in question.
  4. Cash tips must be set out under the policy displayed but the Act does not provide any further regulation for cash tips
  5. Service Charges will also have to be given to staff and treated as if it were a tip or gratuity received . A “service charge” is anything that would lead a customer to believe it is a charge for service, whether received electronically or by cash.

The Act sets out what is meant by a “tip” or “gratuity” which basically means a voluntary payment left by a customer for an employee or employees at the business. It is generally left by the customer on the basis that the customer believes it will be shared amongst the employees. Employers should also note that it is a offence underthe Act for an employer to use terms such as “service charge” which may lead customers to believe that the charge will be given to employees if it is in fact not given.

What is a “contract and platform worker”

A ‘contract worker’ is a person who carries out work other than as an employee, including on a contract for service. ‘Platform workers’ who are engaged in contracts for services will benefit from tips and gratuities. Those who use contract workers to deliver services will be required to display a contract workers tips and gratuities notice.

Who does the Act apply to?

At present, the Payment of Wages Act 1991 (Application of Sections 4B to 4F) Regulations 2022 (attached in the link below) apply to any business involved in:

  1. The sale of beverages (including intoxicating liquor) or food for consumption on the premises at which such beverage or food is sold.
  2. The sale of beverages (including intoxicating liquor) or food by means of casual trading.
  3. The accommodation of overnight guests on a commercial basis in a hotel, guesthouse, hostel, bed and breakfast, self-catering accommodation facility or any similar accommodation facility.
  4. Providing guided tours.
  5. Carrying out non-surgical cosmetic procedures including the following: cosmetic nail care; nail styling; skin care; hair care; hair styling; tattoo services; and piercing services.
  6. Gaming.
  7. The provision of services as a licensed bookmakers.
  8. Providing transport services by means of a public service vehicle other than services provided under a public transport services contract, services provided under a public bus passenger service licence, services provided exclusively for carrying children to or from a school.

What happens if an employee is not happy with the way tips and gratuities are distributed?

An employer can decide on the policy to distribute tips or gratuities. If an employee is not satisfied with the distribution policy the employee may take a case to the Workplace Relations Commission (WRC) for adjudication as to whether the distribution is fair in the circumstances.

Employers should also be aware that they must now include how tips and gratuities are distributed within an employee’s core terms of employment which must be given within 5 days of commencement of employment.

What does the Workplace Relation Commission look at when considering whether a distribution of tips and gratuities to an employee is fair in the circumstances?

In considering a complaint, the Workplace Relations Commission look at a number of factors, 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 service to customers,

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

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

Who can make a complaint to the Workplace Relations Commission?

Employees who either do not receive statements of their core terms of employment within 5 days or who receive a statement that is deliberately false, or misleading may make a complaint. An employee must have at least one month’s continuous service. The complaint must be made within six month’s of the alleged breach.

In addition employees can also make a complaint in relation to:

  • any unlawful deductions from tips and gratuities.
  • any failure to distribute in a manner that is fair in the circumstances tips or gratuities received by the employer by an electronic mode of payment.
  • any unlawful retention of any share of tips or gratuities received by the employer electronically, unless such retention is
    • required by law (e.g., deductions for income tax, PRSI, USC), or
    • to cover the direct costs of distribution (e.g., bank charges, etc.) or
    • where the employer regularly performs the same kind of work as the employees, such an amount that is fair having regard to the amount of work performed by the employer.

What compensation can be awarded?

Where a complaint is upheld, an employee may be awarded compensation not exceeding four weeks’ remuneration.

How can a complaint be made?

An employee can make a claim online through the Workplace Relations Commission or contact the office for some guidance!

For those interested, a copy of the Act can be found at https://enterprise.gov.ie/en/legislation/payment-of-wages-amendment-tips-and-gratuities-act-2022.html#:~:text=The%20Payment%20of%20Wages%20(Amendment,enacted%20on%2020%20July%202022.

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