New law on tips and gratuities

Hotels, restaurants, beauty salons, taxis and transport providers are among the businesses that will be impacted by the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 which came into effect on 1 December 2022. 

The new legislation gives Employees legal rights over how tips are distributed. Under the Act, Employers are required to:

• Provide clarity on the meaning of tips, gratuities and mandatory service charges – all now fall under “service charge”

• Prominently display their policy on how both electronic and cash tips are distributed

• Ensure tips and gratuities – but not mandatory service charges – are placed outside the scope of an employee’s contractual wages in other words outside their normal wages.

• Ensure all electronic tips are distributed fairly and in a transparent way

Organisations will also be required to keep a record of how tips and gratuities are distributed in the event of there being a complaint.

In deciding what constitutes ‘fairness’, employers may find it helpful to consult the Workplace Relations Commission website which lists various factors that are taken into account when considering complaints as to whether the distribution of tips and gratuities to an employee is ‘fair’. These include the seniority of the employee, the value of sales/services generated by the employee, whether the employee is full time or part time and the hours worked.  

The new legislation will create additional work for payroll as Employers must ensure that workers receive a statement for each distribution period showing the amount of tips obtained and paid to the them. This must be done within 10 days of the distribution of tips or gratuities. 

As the new legislation is already in force, it is important that businesses get to grips with the change as soon as possible. For further information and/or advice on how to comply with the new requirements including a policy template, email Clarissa O’Nuallain at hrservices@ifac.ie or call 1 -800-714-050.