Before you leave a tip in an Irish restaurant, read this

Photograph: George Clerk/iStock/Getty

“Amy”, a waiter in a Dublin restaurant, is uncomfortable about what she sees as a major injustice in her industry. Customers “are being lied to”, she says.

When you eat a meal in a restaurant in Ireland, it’s normal practice to tip the waiter – either in cash or by card. Occasionally, restaurants apply a “service charge” on top of the bill instead – a sort of obligatory tip. In either case, customers may assume that these gratuities or service charges go to the staff who served them.

Not necessarily.

Few of the patrons in Amy’s workplace – the Hard Rock Cafe in Dublin’s Temple Bar – realise that many of the service charges added to their bills go not to the waiting staff but to the restaurant owners. The owners, she says, appear to be “getting more tips than we are”.

If you have six or seven people for a few hours, the service charge comes to a lot but you’ll get nothing. And they think they’ve tipped you

In the Hard Rock Cafe, a 5 per cent service charge is added to every food and table service drinks bill. This is never distributed to servers but, in Amy’s words, “goes directly to the owners”. Groups of eight or more have a service charge of 10 per cent added to the bill, half of which goes to the server.

If servers receive any cash or card tips over and above the service charge, they must “tip out” from that (10 per cent to the bar, 10 per cent to bussers who assist servers, and €2 per server per shift to the kitchen). Card tips are reimbursed to servers in cash from the till at the end of a shift. That part of the system “works well, and people are generally honest about their earnings” and tipping out.

The trouble is, few customers will leave a tip if they notice there is already a service charge. As Amy’s former colleague “Charlotte” puts it: “If you have six or seven people for a few hours, the service charge comes to a lot but you’ll get nothing. And they think they’ve tipped you.”

It’s an uncomfortable situation for waiters, working in low-paid, precarious jobs in an expensive capital city. If Amy thinks a customer hasn’t noticed the service charge, she doesn’t point it out. “It’s deceitful, and we’re complicit in that, because we need to pay our rent which is now a million euro a minute.”

RESTAURANT TIPS have been the subject of some public attention lately, following protests at the Ivy restaurant on Dublin’s Dawson Street, media coverage of the subject, and a debate over changes to the law.

A Bill going through the Seanad aims to regulate tips, and the Low Pay Commission has recently considered legislation that would ensure low-paid workers receive all tips due to them (the commission was not supportive of legislation).

While many restaurant workers get customer tips and service charges in addition to their contracted wages, this is not regulated, and there are places it simply does not happen. It’s currently up to restaurant management how fairly this is handled.

In some restaurants, it has emerged, tips or service charges become part of general business cashflow, used to pay wages and other business outgoings. In at least one, card tips are not passed on to waiters. And there are wider problems with tipping: it is often seen by those handling the gratuities as a tax-free bonus (but the tax authorities disagree); and others argue it is an out-of-date practice that serves to perpetuate low pay in the industry.

THE CONTROVERSY BLEW UP late last year when the Ivy restaurant came under the spotlight because of staff disgruntlement. Part of the UK Ivy Collection chain, it opened in Dublin in July 2018.

Waiters at the Ivy are contracted at hourly pay rates of €10-€11. This is made up of minimum statutory pay of €9.80 an hour and a top-up that comes from the “discretionary optional service charge of 12.5 per cent” levied in lieu of a tip on larger tables. In this case, service charges – automatically added to tables of five or more, and seen as in lieu of a tip – are used to part-pay basic wages.

While waiters at the Ivy keep any additional cash tips (after tipping out 25 per cent to other staff), they are also supposed to get a portion of tips left by card. Staff claim that after a few months of the restaurant’s operation, they ceased getting any share of tips paid by credit or debit card.

One worker signed a contract, in October, for €14.90 an hour. They’re now being paid €9.80 an hour, and the difference is being made up with the tips

Last November the Ivy confirmed to The Irish Times that waiters’ hourly rates were part-paid from its service charge. They also said a “bonus” on payslips was a split of card tips, distributed to all staff.

The controversy rumbles on: demonstrations in March, and last Wednesday, inside the large, 243-seater restaurant drew further attention.

Speaking in the Dáil last month, Independents 4 Change TD Joan Collins said the “very swanky and expensive Ivy restaurant” was “taking the major proportion of tips paid to staff – using these tips to make up the difference in their wages”.

“I’ll give you an example,” said Collins. “One worker signed a contract, in October, for €14.90 an hour. They’re now being paid €9.80 an hour, and the difference is being made up with the tips. So this company is robbing the workers of their money and we don’t know where the rest of the money is going.”

Ivy waiters’ only extra is 75 per cent of cash tips (but most tips are by card). Ivy waiters say that even after several months of controversy, staff are still not getting the “bonus” card tips.

On Monday there was a development at the restaurant when the 12.5 per cent service charge, used to part-pay the contracted wages of staff, was extended from larger tables to all tables.

When contacted this week, a spokeswoman for the Ivy did not address our specific questions about card tips but responded with this statement: “An optional discretionary 12.5 per cent service charge is added to tables and this is shared with all staff (except management). If guests chose to leave a cash tip, we encourage the waiter or waitress to also share this with team members, but the final decision is theirs.”

The Ivy: waiters say staff are still not getting “bonus” card tips. Photograph: Dara Mac Dónaill
The Ivy: waiters say staff are still not getting “bonus” card tips. Photograph: Dara Mac Dónaill

OVER IN TEMPLE BAR, some staff at Hard Rock’s Dublin cafe, a franchise of the international chain of rock ’n’ roll themed restaurants, are unhappy at how its service charges are treated. Hard Rock Dublin (HRD) is owned by Entertainment Enterprises, Ltd (EE Group), which runs the Irish versions of TGI Fridays and Starbucks in Ireland, as well as Leisureplex, Mao restaurants, and Dante Pizza restaurants (these last two also automatically add a service charge to bills). The EE Group is owned by brothers Colum and Ciaran Butler.

Hard Rock is popular with English-language students and international tourists who visit Hard Rock worldwide. Its range of music memorabilia is a big draw, and the restaurant was recently revamped. It’s a fun venue, with live music, say Amy and “Robert”, another waiter, though they are aware prices for the casual fare are expensive – “a side of fries is €4.10” – and the average bill for two people is €70-€80.

On the bottom of Dublin’s hard copy menu it says: “Service charge 5 per cent, parties of 8 or more 10 per cent will be applied to your bill.”

According to Amy, “The service charge reduces the amount of tips we make by an extraordinary amount. A lot of the time people will leave zero tips because when they read ‘service charge’ they assume it is a tip for their server. We sometimes hear customers talking as we pass, saying, there’s a service charge, we don’t need to tip.”

In what other business could you add an additional cost on to every product to cover your labour so your company doesn’t have to pay for it themselves?

Robert mentions a family of four, whose recent bill with drinks came to €300, plus a €15 service charge. “They probably thought €15 – that’s a nice tip” and left an extra €2 or €3 for him, thinking it was on top.

The three waiters say they have been encouraged, if customers ask about the service charge, to say it ‘goes to the back of house’. “But it doesn’t,” says Amy, “and I won’t lie.”

They claim some managers press customers who query the service charge to pay it, and they avoid taking it off the bill.

Amy “conservatively” estimates Hard Rock Cafe Dublin’s sales vary widely, from €2,000 on a bad day, up to €15,000 a day on the busiest weekend (excluding bar sales and merchandise, which don’t have a service charge added). She reckons that on a usual weekend night, an individual server at Hard Rock might have sales of €1,200-€2,000, which means the 5 per cent “service charges” come to €60-€100, which goes to the company. With seven servers working, this could come to an additional €700 for the company per weekend night, on top of the displayed menu prices.

If her figures are correct, she says: “The EE group takes from €100-€750 a day from people who believe they are leaving a tip.

“In what other business could you add an additional cost onto every product to cover your labour so your company doesn’t have to pay for it themselves? They want the general public to pay their employees’ wages.”

Hard Rock Cafe: some Dublin staff are unhappy at how its service charges are treated. Photograph: Artur Widak/NurPhoto via Getty
Hard Rock Cafe: some Dublin staff are unhappy at how its service charges are treated. Photograph: Artur Widak/NurPhoto via Getty

She acknowledges that the pay is above minimum wage – but even longstanding waiters’ wages tend to be just 10c or 15c above the statutory minimum of €9.80 per hour. Shift leaders among the servers get a bonus of €12.70 (€15 at weekends) per shift.

Amy and Robert say the restaurant is a fun place to work, and they have good friends there, but they feel it is important to speak out. In addition to this interview, they discuss making an official “protected disclosure” under the so-called Whistleblower legislation.

They are speaking about this for two reasons. “The general public believe the extra charge is going to their server,” says Amy. “But it’s not. “I think people have a right to know about that.”

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They feel they are speaking up for the staff also: “On average I make between €250-€300 a week and have very unstable hours,” she says. “Having a few quid extra in tips helps me pay for my taxi home every night and takes the pressure off a little bit come rent day. This is the case for all of the staff in this company – there are college students trying to get by on very little, people who do this as their careers, and people who are working to support their families.”

IN TGI FRIDAYS IN IRELAND, also owned by the EE Group, the same service charge set-up applies: tips, both card and cash, go to the individual server at the end of the night, but a flat 5 per cent service charge on all food goes to the restaurant (of the 10 per cent service charge on larger tables, half goes to the server, and half to the restaurant).

Server “Stephanie” claims she was told, when taking phone bookings, “don’t mention the service charge”. She says some customers do complain about it and ask where it goes. If they do, “I won’t lie”. Stephanie tells them the 5 per cent “unfortunately” goes to the restaurant.

Her contract, which The Irish Times has seen, states she will earn an hourly rate slightly above minimum pay and says her wage “is a composite rate encompassing service charge”.

Stephanie gets a €6 allowance per full shift towards buying food from the TGI menu. The waiters “tip out” other staff: 10 per cent to the bar, 5 per cent to the food runner if there is one, and 10 per cent to the kitchen, which is distributed in a lump sum twice a year.

Staff do not receive a breakdown of how the figures distributed to the kitchen are worked out, and some in both the Hard Rock and TGI Fridays believe the paid sums don’t relate to the amount of money they pay for tipping out.

At time of going to press, the EE Group had not responded to a request for confirmation of the claims made by waiters in the Hard Rock and TGI Fridays.

TGI Fridays: some customers complain about the service charge. Photograph: Artur Widak/NurPhoto via Getty
TGI Fridays: some customers complain about the service charge. Photograph: Artur Widak/NurPhoto via Getty

POOR TIPPING PRACTICES are not confined to the restaurants mentioned. Dr Deirdre Curran, a lecturer in management at NUI Galway, refers to a 2017 report into “Abuse of Workers in the Hospitality Sector in Galway”, which looked at employment rights. One-third of the 415 hospitality workers surveyed said tips were withheld “regularly/very often/constantly”. Curran stresses that more research is needed.

By contrast with the unclear and arguably unfair handling of tips or service charges in some restaurants, in others staff are largely happy with the tipping arrangements. There is a huge variety of practices and varying levels of transparency about how restaurants handle tips.

In some establishments, individual waiters keep their tips, after “tipping out” other staff such as bar and busser. In others tips are pooled and distributed in what’s called a “tronc” system – a separate organised pay arrangement used to distribute tips, gratuities and service charges.

It is not unusual, however, for managers, owners or senior personnel to take a share of tips.

Sharing tips with managers is common. I only know one restaurant which didn’t steal the tips or have their hand in the tip jar at all

An experienced waiter who has worked in several restaurants comments: “Sharing tips with managers is common. I only know one restaurant which didn’t steal the tips or have their hand in the tip jar at all.”

There are also many examples of good practice. In Chapter One, the Michelin-starred restaurant on Dublin’s Parnell Square, all cash and card tips, and service charges for large groups are pooled and divided across all staff, who are told when they get their contract what percentage they’ll get, which is based on seniority, and more goes to front of house.

While “it isn’t always clear what the total tip intake is, we usually have a fair idea”, says a waiter there. Waiters are paid a shift rate and tips are not used for basic pay. The waiter understands the restaurant guarantees a certain level of tips, and tops them up in a bad week.

Chapter One restaurant manager Daniel Desmond says tips are not contractual – “it’s a gratuity”. There is no service charge; gratuities are discretionary, and a “tronc master” among staff, not a manager, divides the tips, he says.

Chapter One: a tronc master, not a manager, divides tips among staff. Photograph: Alan Betson
Chapter One: a tronc master, not a manager, divides tips among staff. Photograph: Alan Betson

In Asador in Dublin 4, a waiter describes tips (cash, card and service charges for larger tables) being divided among everyone, according to the hours they worked, at the end of the week. Director Shane Mitchell confirms this.

“I stay out of it completely,” he says. “They are paid to the staff for the service provided and are administered by the restaurant manager/assistant manager,” with the majority of tips going to front of house, and junior staff getting slightly less.

The Asador waiter, however, feels it is unfair that managers and supervisors on salary get tips, as well as lower-paid staff. “It’s wrong.”

In Fade Street Social in Dublin 2, tips are managed by the general manager and are shared among the staff. A percentage of tips are given to the kitchen each week, and the most senior established staff get the highest amount of tips. Managers do receive tips “but, to be clear, all of the managers work in the building and generate tips themselves”, says spokesman Gerard Melinn.

Some 23 per cent of all tips in Cafe En Seine on Dublin’s Dawson Street (part of the Mercantile Group) go to the kitchen, with remaining tips divided daily between everyone else, including managers, according to a waiter. Because the spread is so wide, on a shift “I might get €150 in tips and walk out of the restaurant with €13”.

A waiter in a company with two suburban Dublin restaurants describes staff sitting together at shift change and pooling tips. Card tips were taken in cash out of the till “and added to the tips bucket”. Each front-of-house worker got a share of tips in an envelope according to hours worked, with an extra envelope to be subdivided among kitchen staff (who were on higher wages). However, on weekend nights, 10 per cent of the tips go to the owner before they are shared out, “which everyone was very pissed off about”.

IN THE MURKY WORLD of tips and service charges, there are myriad problems, for staff, managers and diners.

1. Lack of transparency
A waiter who has worked at a number of Dublin restaurants says: “I don’t trust anyone when it comes to tips at all.” While many restaurants are scrupulous, in others it is unclear to staff and customers how tips are handled. Waiters describe witnessing large amounts in tips, but staff getting what seems a paltry amount.

2. Tips or service charges used to pay contracted wages
On the practice of using tips or service charges to pay basic wage costs, employment lawyer Richard Grogan says: “There’s an assumption [by diners] that tips and service charges go to staff on top of wages.” Using tips or service charges to pay basic contracted wages is a “misclassification” he says; if it isn’t going to staff, “they should not be able to call it a tip or service charge”.

3. Tips and service charges “absorbed” into general cashflow
When service charges go into the general pool or to the owner, they become part of the business’s general income, and an additional invisible cost onto the displayed menu price for consumers. Grogan’s analogy is: “If you went to buy a T-shirt for €20, but at the till were charged €22.50 to cover a 12.5 per cent service charge, there would be uproar. This is pure unadulterated rip-off of customers.”

4. Who is included in a share-out of tips?
In some restaurants, kitchen staff are on higher pay rates and may get a lower share of pooled tips or tip-outs from waiters. In others, kitchen staff are on similar rates to waiters, but see little of the largesse from an enjoyable dining experience, to which their work contributed. Then there’s the issue of owners and managers getting a share of tips, which boosts already higher earnings.

5. Should tips be pooled or not?
There is disagreement among waiters about this. Not everyone works equally: “Why are they getting the same money as me?” asks one waiter who doesn’t see why the tips she generates should be pooled and shared equally with others who may not pull their weight or have as much experience. “It’s a major issue. I’m carrying some staff members.” Elaborate tronc programmes with points for experience and seniority may be more transparent, but pooling tips is less complex for smaller operations – and has the advantage of sharing the bad luck of having a poor tipper.

6. Cash and card tips
In an increasingly cashless world, tipping in cash in the hope that a waiter – not their boss – gets a tip, can be difficult. In some restaurants, card tips are taken from the till in cash form to be distributed among staff; in others, they are taken by the restaurant and redistributed later. This system is not always clear and, in some cases, appears not to happen at all.

7. Tax
Tips are part of income, and liable to taxation. It’s up to workers to declare them. The more transparent tips become, the more transparent the tax liability becomes. This is a grey area and some prefer to keep it deliberately vague. In the recent Seanad debate, Senator and former minister James Reilly expressed the wish that tips would “remain free from the Revenue Commissioners’ attention”. Lawyer Richard Grogan is appalled at this suggestion that Revenue should turn a blind eye to income, and that a black market area of the economy would be acceptable.

ARE THERE ANY SOLUTIONS? Discussing the issue of tips in the Dáil in March, Minister for Trade Simon Coveney said: “Let me just be very clear: Any employer that calculates salary and includes tips in that figure is acting illegally. You can’t do it. Tips are separate to salary. And if there are issues, the Government needs to act there: we will look at that closely.”

But Coveney was incorrect – it is not illegal at the moment for employers to keep tips, which is why there is a concerted effort to do something to protect the gratuities of lower-paid precarious workers in the hospitality sector.

What can be done?

The Restaurants Association of Ireland favours a voluntary code; president Liam Edwards said in March that tips were a major issue facing restaurants, which its chief executive, Adrian Cummins, and Minster for Employment Affairs Regina Doherty discussed.

As there is currently no law requiring tips to be passed on to employees, is it really any surprise that so many of the larger restaurant chains are engaging in poor practice in this area?

“We feel it is best practice that members display their tipping policy. I think the customer is looking for transparency and confidence that when they tip for good service that the money goes directly to staff.”

A voluntary code may not be sufficient. The “best practice” of displaying tips policy is as rare as hen’s teeth. And phrases such as “distributed among all the staff” are non-specific and could be argued to be virtually meaningless.

Senator Paul Gavan’s National Minimum Wage (Protection of Employee Tips) Bill 2017, currently going through the Seanad, would have teeth beyond a voluntary code, stipulating that employers cannot withhold gratuities, and including reference to service charges that “a reasonable person” would infer “the customer intended or assumed that the payment would be redistributed to an employee or employees”.

Gavan, a Sinn Féin senator, says: “As there is currently no law requiring tips to be passed on to employees, is it really any surprise that so many of the larger restaurant chains are engaging in poor practice in this area? A Sectoral Employment Order could easily address this issue.” Such orders fix statutory minimum pay, pension, unsocial hours payment and sick pay entitlements in a sector. Gavan says they have worked well in the security and cleaning sectors.

Transparency is essential if there is to be any sense of fairness – and avoid disgruntled staff. Who handles and manages distribution of tips – staff or management – is a factor in transparency. It is also arguable that if service charges or tips are retained or part-retained by the owner, that money should instead be added to the displayed menu prices.

SO HOW SHOULD YOU, the restaurant customer, approach the practice of tipping?

For a member of the public eating out, there is uncertainty when presented with a bill. If you leave a tip or pay a service charge, it may go to the individual server, or be pooled among the lower paid staff, or management/owners may share in the tips pool, or it may be handled entirely by management, and contribute to the above-the-line profit.

The advice from service staff is to look properly at your bill. If there is a service charge, always ask where it goes. If you are considering a tip on your card, ask the waiter where it goes. And act accordingly. If a service charge is not going to staff, you can politely say you would rather not pay it and leave a tip instead.

Basing tips on percentages is irrational. We pay a larger tip for a waiter to bring a fillet steak to the table than to bring a hamburger, for the same service

And basing tips on percentages, rather than the amount and quality of service, is irrational. We pay a larger tip for a waiter to bring a fillet steak to the table than a hamburger, for the same service. As Grogan points out, pouring a €70 bottle of wine is the same service as a €20 bottle in a restaurant.

Some people hold a more radical view: that there is a problem with the whole concept of tipping. Why, they ask, should someone’s income for a job be partially paid on a grace-and-favour basis, according to the whim of the dining public?

Scholars point out that tipping is a legacy of slavery and racial oppression in the US; part of the reason it is less ingrained in Europe. Perhaps the simplest solution would be for restaurants to pay staff adequately for the job they do – and do away with tips altogether.

Some names have been changed

dfalvey@irishtimes.com

A GREY AREA OR A PITCH-BLACK ONE?

Analysis: It’s entirely legal for a restaurant to keep employee tips, writes Catherine Cleary

The tipping economy in Ireland is not so much a grey area as a pitch black sensory deprivation chamber. There is a yawning absence of data. No one knows how much cash is scooped off saucers or rattled out of tip jars or how fairly it is distributed.

But the legal position on tips seems clear: they are “regarded as income and are taxable”, according to a spokesman for the Revenue Commissioners. This is true of tips distributed to wait staff or kept by their employer. If tips are distributed to wait staff by the business then that restaurant should be deducting tax, says the Revenue spokesman.

If the employer keeps the tips “then this income is treated as part of the turnover of the business.” And it is entirely legal for a restaurant to keep employee tips.

Last month the Low Pay Commission advised against legislating to ensure workers receive tips because of its concern “that there could be unintended negative consequences” leading to already low-paid workers facing a reduction in take-home pay.

The commission said the lack of data on tips was a major obstacle to figuring out a fair solution for low-paid workers. An unknown portion of tips is paid in cash. Wait staff who get their share in a divvy up at the end of a shift are in theory obliged to declare those tips to Revenue and pay tax on them if they are big enough to bring them into the tax net.

Technically, every lounge boy or student waitress should tot up the change and crumpled fivers, lodge them to a separate bank account to keep track and file a tax return as a self-assessed taxpayer.

So how much tip income is declared under the self-assessment system by wait staff, The Irish Times asked the Revenue Commissioners. We don’t have that information readily available, replied Revenue. Declared tips are recorded in with a “catch all” net of untaxed income arising in the State, according to the commission.

So how many wait staff are registered for self-assessment? “The figures you have requested are not compiled in the normal course and are therefore not readily available.”

The omerta around tips, cash or otherwise, leaves already low-paid workers vulnerable. The commission noted that “workers in the hospitality industry are reluctant to speak out about employers who are withholding tips unfairly because many workers are not declaring their tips for tax purposes. There is a fear that employers might threaten to report workers to the tax authorities in order to silence them. For this reason, some workers in the hospitality industry are advocating for legislation that requires all tips to be tracked and reported.”

This is the system that operates in Quebec, where the Protecting Employees Tips Act came with an obligation on hospitality workers to declare their tips.

Germany exempted all tips from income tax, as those dependent on them generally have low wages, and the current law only encouraged a black market

In Germany, the commission noted, this openness about tips went one step further. “In 2002, Germany exempted all tips from income tax. The logic behind this decision was that those dependent on tips generally work in the low-wage sectors of the economy and that the current state of the law only encouraged them to work in the black market.”

Sinn Féin Senator Paul Gavan advanced the National Minimum Wage (Protection of Employee Tips) Bill in March 2017 and it went to committee stage in the Seanad last month. At the committee hearing Senator Gavan told the Seanad that “one-in-three workers in the hospitality sector does not receive their tips... We cannot have these workers left in the lurch for another 12 or 15 months,” he said.

Richard Grogan, an employment solicitor who made a submission to the commission, describes its finding that it was not possible to legislate as “quite incredible. The reality is the Department of Employment Affairs is going to condone charges being disguised as a service charge, which customers assume will go to staff, instead of just a cost you pay to the restaurant”.

Grogan describes the service charge which is not passed to service staff as a “pure unadulterated rip-off of customers. It’s an umbrella of convenience to pretend this somehow is for the staff when in reality in most restaurants it is just an added cost to customers . . . If it is impossible to legislate for tips and service charges, then simply ban restaurants charging service charges.

“At least then the true prices would have to be displayed. I do not accept it is impossible to legislate to provide tips to staff. There is just not the political will to do so.”

If everyone left a 10 per cent tip on their card last Christmas then almost €30m went through business accounts, as taxed income to staff, a boost in turnover, or both

Other changes in consumer behaviour may bring the era of the cash tip to an end. As food service businesses go increasingly cashless wait staff may be further separated from access to tips. Figures from the Central Bank show a huge increase in debit cards used to pay for restaurant and dining expenses in December 2018. Diners spent €278 million on debit cards in restaurants and hotels during the Christmas period, a 29 per cent increase on December 2017.

If everyone left a 10 per cent tip on their card then almost €30 million went through business accounts, either as taxed income to staff or as a boost in turnover for the business, or both.

Bord Bia predicts the restaurant and cafe sector will increasingly move to cashless transactions. “Many of the emerging fast casual players are moving to cashless as a way to smooth the overall transaction process and eliminate the challenges of handling cash,” noted the State food agency in a recent report.

Leaving a tip on a card requires the consumer to trust that the business is going to pass the payment to wait staff. In the absence of a clear picture of the tip economy and regulations to ensure fairness, that feels like more of a leap of faith than ever.

Catherine Cleary writes a weekly restaurant column for The Irish Times