New rules on the handling of tips and service charges will soon come into force after being approved in both the Dáil and the Seanad on Wednesday.

The Payment Of Wages (Amendment) (Tips and Gratuities) passed through both Houses of the Oireachtas, and the new law aims to ensure that tips and gratuities are "distributed fairly to staff" while prohibiting businesses from describing mandatory charges as "service charges" unless they are treated in the same way as tips or gratuities.

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar said the law would "stamp out bad practices" and ban employers from using tips to make up basic pay.

"We’re all familiar with tips and service charges, but it’s not always clear how they are allocated to staff, especially if paying by phone or debit card. The Payment of Wages Act will ensure that the tipping and gratuities policy is displayed clearly in any establishment," he added.

Varadkar said the rules would be in place "very soon," and the government will start consultations with employer and employee organisations shortly on new regulations that will give effect to the act.

In Association with

The bill is one of several aimed at bolstering protections for employees brought forward by the government in recent months. The Sick Leave Bill also passed in the Oireachtas on Wednesday.

What does the bill aim to do?

The bill will:

• provide clarity on the meaning of tips, gratuities, service charges, and mandatory charges;
• put tips and gratuities outside of workers' contractual wages;
• oblige employers to prominently display their policy on mandatory charges and the distribution of cash and card tips;
• oblige employers to distribute tips received in electronic form (via debit/credit card, smartphone, etc.) "fairly, equitable and in a transparent manor"
• ensure that any charge described as a 'service charge' or any other term that implies it as a charge for service, is distributed in the same manner as tips received electronically.

How can tips be distributed?

The Department of Enterprise, Trade and Employment said fair and equitable distribution would be context specific and take into account matters such as hours worked, value of sales income or revenue generated, the worker's role in service delivery, etc.

When will it be implemented?

Varadkar said "very soon." The government first has to consult on employer and employee groups on regulations -- specific rules that will give effect the act.

Will the legislation be reviewed?

The bill requires the Minister for Enterprise to review the legislation after it has been effect for one year to assess the effectiveness of the measures and decide if any further measures are necessary.

(Pic: Getty Images)