Tips, Gratuities and Service Charge Legislation
Tips and GratuitiesTips, gratuities and service charges are commonly associated with the hospitality, tourism, hairdressing, taxi and delivery services, amongst others. From 1 December 2022, the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 introduces new rules as to how employers have to share tips, gratuities and service charges amongst employees. Some key features:
While employers will be required to include detail on how cash tips are dealt with when displaying their policy towards tips and gratuities, there will be no other regulation of ‘cash tips’. What is a “tip or gratuity”A ‘tip or gratuity’ is a voluntary payment made by a customer to, or left for, an employee or group of employees which they intended or assumed that the payment would be kept by the employee or shared with other employees.What is a “mandatory service charge”A ‘mandatory service charge’ is a contractually imposed and receipted payment that a customer must pay, in addition to the cost of certain goods or services. It is an offence for an employer to use a term such as ‘service charge’ that leads customers to believe it will be distributed to employees if they do not actually distribute that charge.What is a “contract 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.The new rules apply to employers in the following service areas:
- Employers cannot use tips and gratuities to ‘make up’ contractual rates of pay and cannot make a deduction from a person’s wage in relation to tips and gratuities.
- Workers are legally entitled to receive electronic tips and gratuities and they must be distributed in a fair manner. The employer must provide a statement to workers showing the amount of tips obtained in a period and the portion paid to the individual employee for that particular period.
- An employer cannot retain any share of electronic tips. However, there may be circumstances e.g., to pay tax, or bank charges arising from providing electronic modes of tipping, or only where the employer regularly performs to a substantial degree the same work performed by some or all the employees, where such an amount may be deducted that is fair in the circumstances.
- Businesses must clearly display their policy on how tips, gratuities and service charges are distributed.
- “Platform workers”, who are not direct employees, are included.
- Any charge called a “service charge” or anything that would lead a customer to believe it is a charge for service, whether received electronically or by any other means, will have to be distributed to staff as if it were a tip or gratuity received by electronic means.
What is an “electronic tip”An ‘electronic tip’ is a payment other than by cash. Examples include:
- The sale of beverages (including intoxicating liquor) or food for consumption on the premises at which such beverage or food is sold.
- The sale of beverages (including intoxicating liquor) or food by means of casual trading.
- 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.
- Providing guided tours.
- 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.
- The provision of services as a licensed bookmakers.
- 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.
There will be no regulation of tips received by cash or other means. What happens if an employee is not satisfied with the way tips and gratuities are distributed?While an employer must consult with employees on changes to the current way tips or gratuities are to be distributed, employee consent is not required and it is for the employer to decide on the policy they chose regarding the distribution of 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.An employer must now include the policy regarding the distribution of tips or gratuities and service charges in the employee’s core terms and conditions of employment within 5 days of commencing employment.What are the factors for the Workplace Relation Commission to consider, on receipt of a complaint as to whether a distribution of tips and gratuities to an employee is fair in the circumstances?In considering a complaint under Part 4 of the Workplace Relations Act 2015 regarding whether or not a distribution of tips or gratuities to an employee is fair in the circumstances, a WRC adjudication officer must 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 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 complaints to the Workplace Relations Commission (WRC)The employer’s policy on the way tips or gratuities and mandatory charges are treated will become part of the core terms that must be given to a new employee within 5 days of commencing employment. Employees who do not receive statements of their core terms of employment within 5 days may bring a complaint to the WRC.An employee must have at least one month’s continuous service with that employer before they are entitled to refer a complaint to the WRC about their core terms of employment.Where such a complaint is upheld, an employee may be awarded compensation not exceeding four weeks’ remuneration.Employees may also refer a complaint to the WRC under the Payment of Wages Act in relation to the following:
- By debit / credit card
- By smart card
- By way of apps designed to facilitate payment of tips and gratuities
- By means of a ‘push notification’ app
- any unlawful deductions from tips and gratuities;
Where a complaint is upheld, an employee may be awarded compensation by an Adjudication Officer who can award redress or compensation under the Payment of Wages Act.If you feel your employer has breached any of the above employment legislation you can make a complaint to the Workplace Relations Commission. Your complaint must be presented within 6 months of the date of the alleged breach. You can submit your complaint using the WRC on-line form see: www.workplacerelations.ie.
- any failure to distribute in a manner that is fair in the circumstances tips or gratuities and service charges received by the employer by an electronic mode of payment;
- any unlawful retention of any share of tips or gratuities and service charges 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), 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.