The government has introduced a Bill aimed at the bar and restaurant sector that, if passed, will govern how tips are paid to employees.

Speaking in the Seanad, Tánaiste Leo Varadkar conceded that the issue is not "straightforward" and that the legislation would target a minority of employers in the restaurant and hospitality sector that use tips and gratuities to meet payroll obligations and other overheads.

Mr Varadkar assured restauranteurs that he was conscious of cost concerns of bars and restaurants, and especially those of businesses in the border region competing with rivals in Northern Ireland, but that the cost burden imposed by the new rules would be "minor".

At present, there is no legislation that obliges employers to pass on tips to staff, and the Payment of Wages (Amendment) (Tips and Gratuities) Bill 2022, which was initially brought forward in October 2019, aims to give better protection of workplace tips to staff.

The legislation will apply in all workplace settings, not just bars and restaurants, and including businesses in the tourism, hospitality, hair and beauty, taxi and delivery services sectors. There are four main tenets to the Bill:

In Association with

1. Employers will be prohibited from using tips to make up contractual rates of page.

2. Workers will be provided with legal entitlements to tips and gratuities paid by debit or credit card or by other electronic means, and such tips and gratuities "should be paid out to workers in a fair and transparent manner".

As such, employers must provide a statement to workers showing the value of tips obtained in a given period and the portion paid to the individual employee in that particular period.

3. Employers may not retain any share of tips received electronically, except to cover cost of tax/bank charges arising from providing electronic modes of tipping, or where he/she regularly performs to a substantial degree the work performed by employees.

4. Finally, businesses must clearly display policy on how, tips, gratuities and mandatory service charges are distributed, so there is room to manoeuvre from business to business.

Cash tips excluded

No regulation on cash tips will be introduced, with Mr Varadkar stating that such a provision was "unworkable".

Service charges will not be made into tips under law, but the minister has asked officials "to consider an amendment that would also prohibit the use of mandatory service charges to make-up wages and to require that they go to staff as income".

Discretionary service charges will fall under Bill's definition of tips and gratuities, and the rules set out in the Bill will apply to these voluntary customer payments.

The ministers stated that it is his understanding that a portion of mandatory service charges will go towards tips, which will depend on the establishment's clearly displayed tips policy, which employees must be consulted on before it is introduced.

When adjudicating on a complaint, a WRC officer may take into account, when determining if tips were distributed fairly, factors such as the seniority or experience of employee, the value of sales generated by them, or hours worked.