Government approve new rules on tips which takes effect on 1 December 2022

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 will come into effect on 1 December. The new law will give employees a legal entitlement to receive tips and gratuities paid in electronic form and requires that these tips and gratuities should be paid to workers in a fair, transparent and equitable manner. A fair and equitable distribution will be context specific, taking account matters such as hours worked, value of sales income or revenue generated, the worker’s role in service delivery and so on.

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 aims to:

• provide clarity on the meaning of tips, gratuities, service charges and mandatory charges
• place tips and gratuities outside the scope of a person’s contractual wages
• oblige employers to display prominently their policy on mandatory charges and the distribution of cash and card tips
• oblige employers to distribute fairly, equitably and in a transparent manner, tips that are received in electronic form, for example, through debit or credit cards or smart phones
• ensure that any charge described as a ‘service charge’, or any other term that implies it is a charge for service, is distributed to employees in the same manner as tips received electronically
• ensure that workers will be provided with a statement showing the amount of tips obtained and the portion paid to the individual worker in the period

Up until now, there has been no legislation which obliges employers to pass on any tips or gratuities received by them to their employees. This legislation will prohibit employers from using tips to contribute towards employee's payment of wages. Therefore, it is important for employers to have a clear policy statement setting out how tips and gratuities are distributed to its workers.

The Act will also require the Minister for Enterprise, Trade and Employment to review the legislation after one year to assess its effectiveness and decide if further measures are needed. More information is available on the Workplace Relations Commission website, see here.

You can contact our HR Executive Fiona Mulligan on fiona.mulligan@sfa or ring 01 6051557 if you have any questions on the above.