Q&A: What does the new law on tipping mean when it’s time to pay the bill?

Businesses have to have and clearly display a policy on how the money is distributed among staff

What’s happening with tipping?

From Thursday, December 1st, the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 becomes law. It requires hotels, restaurants and various other places of business to have and to clearly display a policy on how they distribute tips and gratuities. Employers are expected to enforce it fairly and if employees feel that is not being done they can make a complaint to the Workplace Relations Commission.

What other places of business?

The legislation affects those driving taxis and tourist buses, hairdressers and tattoo artists, among others. Importantly, delivery workers and other “platform staff”, even where they are not employed directly by the restaurant, are covered.

Who stands to benefit most?

On the face of it, waiting staff are the most obvious ones. The issue of who gets what from the tips left for those who serve food and drinks has long been a thorny one. With some front of house staff, the ones that deal most directly with customers, sometimes getting the entirety of a gratuity left by a customer but also, in some extreme cases, almost nothing, with employers sometimes taking a cut to cover anything from electricity bills to wages to breakages. From now on, any money clearly intended as a tip must be distributed to staff as an addition to their wages. That includes service charges.

But services charges always went to staff, right?

Wrong. Again, there was a huge diversity of approaches in the hospitality sector to the charges, with some establishments only applying them to larger parties to effectively ensure a gratuity was provided, while other employers regarded the money brought in as part of their income to cover costs. This has long been a bone of contention, given the number of customers who believed they were effectively leaving a tip by paying the charge and so left little or nothing else regardless of how good the service had been.

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So, no need to ask staff if it’s better to leave a tip in cash then?

Well, as it happens, the new regulations primarily apply to card/electronic transactions, with those behind the legislation suggesting that cash tips were never under the control of management and are impossible to regulate anyway. This is disputed by some and clearly, again, there were different approaches in operation. From now on, in any case, management have to have a stated policy on cash tips, but its enforcement will not be policed. In the case of card or other electronic payments, the staff must receive written detail of what they are receiving and on what basis, after which they have recourse to the WRC which can award them up to four weeks’ remuneration if they are found to have been treated unfairly with regard to the distribution policy.

And who decides the policy?

To a large extent, proprietors, who are free to set their own policy, establishment by establishment, although the legislation sets down a variety of factors to be taken into account, including the role of the person, their seniority, the volume of sales generated and number of hours worked. This all seems to leave plenty of scope for disagreement whether it is who – particularly managers/owners – gets what among the staff.

Those running the business at least have to stand over what should be a clear policy in their dealings with customers, however, while staff have a basis for engagement if they are not happy. Previously, many complained of not really knowing where they stood, with money simply withheld without clear explanation.

Does this mean higher prices?

It may do, but in places where staff were previously getting all of the gratuities, it should not make any difference. Some even argue the staff may be worse off due to Revenue having a clear record of their electronically obtained tips. In others, the new regulations could significantly hit income. For example, with a hotel that previously retained service charges now having to include that money in the base price of a wedding. Customers must then decide whether to leave a tip on top of that, but there should at least be more transparency.

Emmet Malone

Emmet Malone

Emmet Malone is Industry and Employment Correspondent at The Irish Times