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New rules about how employers share tips.

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 became law on the 20th of July 2022 and comes into effect on the 1st of December 2022. This Act introduces new rules about how employers share tips, gratuities, and service charges amongst its employees and gives new rights to employees. The aim of this Act is to provide clarity on the meaning of tips, gratuities and service charges.

An important features of this Act are that employers cannot use tips and gratuities to ‘make up’ contractual rates of pay and cannot make a deduction from a person’s wage in relation to tips and gratuities. Employees are legally entitled to receive electronic tips and gratuities and they must be distributed in a fair, equitably and transparent manner. This will be context-specific, it will take into account factors such as the seniority or experience of an employee, the role and influence of the employee in providing service to customers, or the number of hours worked (This list is not exhaustive). The act clarifies that an employer cannot retain any share of electronic tips. The employer must provide a statement to workers showing the amount of tips obtained in a period and the portion paid to the individual employee for that period. However, there may be circumstances e.g. to pay tax, or bank charges arising from providing electronic modes of tipping, or when the employer regularly performs to a substantial degree the same work performed by some or all the employees, where such an amount may be deducted that is fair in the circumstances.

Furthermore, customers have the right to know what service charges are used for and who they go to − this will now be reflected in these upcoming changes.  From the start of December this year, employers must clearly display their policy on how cash and card tips, gratuities and service charges are distributed. The ‘Tips and Gratuities Notice’ must clearly state:

  • Whether or not tips or gratuities are distributed to and among staff
  • The way they are distributed and the amounts distributed
  • Whether or not service charges (or any portion of them) are distributed, and if so, how they are distributed and amounts distributed

In the past, there was no legislation which requires employers to give the tips received by them to employees. Therefore, a customer had no way of knowing if the tip they left was given to the employee they dealt with, and the worker had no protection if their employer chose to keep some or all the tips left by customers. This new law will provide clarity to the customer as to where their tip will go.

All employers are obliged to consult with their employees on any changes to their current process regarding tips or gratuities distribution. Under this act it is for the employer to decide on the policy that will be implemented in relation to the distribution of tips or gratuities. An employer must now include the policy regarding the distribution of tips or gratuities and service charges in the employee’s core terms and conditions of employment within 5 days of commencing employment. It is important to note that an employee has the right to take a case to the Workplace Relations Commission if they feel the way the employer is distributing the tips or gratuities is unfair.

This new law is another improvement to employees rights, which is an area that the Government is focusing on. Other elements in this plan include a new public holiday in February, Statutory Sick Pay, the upcoming Right to Request Remote Work and the plan to move to a National Living Wage.

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