A top tip for hospitality employers: treat your staff as well as you can

As industry prepares for a new phase of pandemic, the State is devising new laws to boost workers’ rights to gratuities

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Hopefully this time it is not a mirage. There is genuine optimism that the most damaging anti-virus restrictions will soon be unwound and that the worst affected parts of the economy, such as the hospitality sector, can start plotting a path back to something resembling normal trading.

But even if those hopes come to fruition, familiar problems will remain for the industry. Chief among them is the crippling lack of workers, such as chefs and waiting staff, which acts as a constraint to growth. Employers in the sector have railed in the pandemic against the damage caused by heavy-handed restrictions, which have sparked a flight of labour to other sectors such as retail.

Yet the dogs on the street also know that some hospitality industry employers have, over the years, contributed to the problem themselves by tolerating sometimes-shabby working conditions. It isn’t a problem caused by all hospitality employers and brutal working conditions may no longer be as endemic as some of the industry’s critics make out. But there is still a real issue there for employers to address. With the Government still so highly engaged with the sector, now is a good time to make a start.

A major issue is pay. Hospitality workers have some of the lowest wages in the economy. But for customer-facing staff in restaurants, bars and hotels, this impact of low wages has always been defrayed by customer tips or gratuities. But workers’ representatives, such as the Unite trade union, as well as some academics, such as NUI Galway business lecturer Deirdre Curran, have produced research to suggest that many employers in the sector keep some or, in egregious cases, all of the tips that customers leave for staff.

Unite’s idea is for the Government to introduce a mechanism in law to declare that tips from customers to staff are gifts. A gift is not income, which is taxable

Curran’s research found that only one in five hospitality staff gets to keep all of their tips directly. This may be misleading as it could be because a share is kept for other staff such as chefs – that is fair. But clearly some employers are also taking a cut. Unite’s surveys conclude that only 40 per cent of wait-staff get to keep all of their cash tips, while even less get to keep their credit card tips, which are unavoidably handled by employers. The majority of the workers surveyed by the union say they receive nothing from restaurant service charges levied on customers’ bills, which most diners consider to be a formalised tip.

The Low Pay Commission, which examined the issue in 2018 before Curran had completed her latest study, concluded that there was not enough solid empirical evidence to estimate the full extent of the problem of so-called “tip theft” by hospitality employers. But although it is a cliché, the notion that there is no smoke without fire suggests there still must be a problem there that needs solving.

For example, customers will be infuriated to learn that some employers use service charges – which are treated differently in law to tips or gratuities – to pay part of the staff’s wages. In the eyes of many customers who make the payment, this effectively amounts to the same thing as the employer keeping a tip: customers do not intend for it to be used to defray business expenses.

Sinn Féin produced a private members’ Bill a couple of years ago to address the issue of tip theft, which, when you think about it, has to be one of the meanest things a hospitality employer can do. While Sinn Féin’s Bill passed through the Seanad, it got bogged down in the Dáil due to a lack of Government support. Ministers at the time suggested the wording of the Bill would bring all tips into the scope of tax authorities – the more records you keep, the more interested the tax authorities become.

Leo Varadkar, the Tánaiste and Minister for Enterprise and Employment, has now come up with his own Bill, the Payment of Wages (Amendment) (Tips and Gratuities) Bill, to protect gratuities from being plundered by employers. He met officials from Unite this week who seemed to be broadly supportive of his plans to address the issue, albeit they want the proposed legislation to go even further than its current draft, and give the same protection for service charge payments that it proposes to give to credit card and other tips.

Divvy up tips

Unite has a very simple proposal that seems to make a lot of sense. It would help address the issue for workers while also giving succour to employers because it would make the sector more attractive for staff and alleviate the labour shortage. Unite’s idea is for the Government to introduce a mechanism in law to declare that tips from customers to staff are gifts. A gift is not income, which is taxable. Workers would then be free to divvy up all tips between themselves any way they choose.

Declaring tips as gifts and also removing them from the tax net (and from the grubby claws of some unscrupulous employers) would hardly blow a major hole in the national budget. Yet it would empower staff to look after their own interests by nailing down their rights to the cash in law. It would empower customers who could be sure that the cash goes where they intend it to, and the guaranteed extra income might tempt a whole new cohort of workers into the sector, solving an industry problem.

Employers’ groups, such as the Restaurants Association of Ireland, are actually broadly supportive of legislation to protect staff tips. There does seem to be some reticence in the industry, especially from hoteliers, over imposing formal restrictions on the distribution of service charges. But if a pro-worker approach helped to solve the staffing crisis, I’m sure they would get over it eventually.

Pay aside, both Unite and Curran’s research also make clear that there are other issues affecting hospitality staff, such as a culture of bullying and harassment in certain sections of the industry and widespread non-adherence to laws around rest breaks, and similar breaches.

But if you want to quickly improve the lot of employees in the hospitality sector, boosting what they have in their pockets after a hard night’s work is the best place to start.

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