The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 came into on December 1st, 2022. The Act introduces new rules about how employers share tips, gratuities, and service charges amongst their employees. It also makes it illegal for employers to use tips or gratuities to make up basic wages.
The act aims to provide fairness to employees, clarity to customers and the new requirements mean employers must display their policy on tips and services clearly and publicly.
Furthermore, the act prevents employers from describing a mandatory service charge applied to a customer’s bill as a ‘service charge’ unless the payment is treated by the employer in the same way as an electronic tip or gratitude. This means that mandatory service charges can only be added to a bill if the money goes to employees. A ‘tip or gratuity’ is defined as a payment made by a customer which they assume is kept by the employee and/or shared with other employees. A ‘mandatory service charge’ is a payment that a customer must pay and is automatically included in a bill for certain goods or services, in addition to the cost of the goods or services.
Electronic tips (by card or smart phone) must also be distributed in a transparent, fair way.
Factors to be considered when deciding on how tips are distributed include:
- The worker’s role in the delivery of service
- Whether they are on a full time or part time contract
- Number of hours worked
- Value of sales
- The seniority or experience of the employee
Employers must also give the employee a statement of the tips and gratuities distributed, including the total amount of electronic tips received during a particular period and how much was paid to you. Employees must get this statement within 10 days of the tips and gratuities being distributed.
All employees must be consulted on the policy introduced on how tips or gratuities will be distributed. Employers must also consult with employees before making a material change to the policy.
This new legislation will be reviewed after one year to assess its effectiveness and decide if further measures are needed to be implemented.
Minister for Enterprise, Trade and Employment, Leo Varadkar, said:
“Tips can form a significant percentage of a worker’s take-home pay and these changes go a long way to ensuring those tips are distributed to the people who have earned them.
“This new law is a positive step towards improving the rights and entitlements of lower-paid workers as well as providing transparency for customers”
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