Advice on tips and gratuities in the workplace

Q: What are tips, gratuities and service charges?

Tipping is mainly associated with the hospitality sector. It is also common among other services such as taxi drivers, hairdressers, tour guides and delivery drivers.

Employees usually get tips from customers through one of the following types of payment:

• Mandatory service charge
• Discretionary service charge
• Tip or gratuity paid to the employer by credit or debit card
• Tip or gratuity paid into a communal pool, for example a staff box or similar
• Tip or gratuity handed directly to the employee

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 became law on July 20, 2022. It introduces new rules about how employers share tips, gratuities, and service charges amongst employees. The Act came into effect on December 1, 2022.

Q: What is a mandatory service charge?

This is a payment that a customer must pay for certain goods or services, in addition to the cost of the goods or services.

Q: What is a tip or gratuity?

A ‘tip or gratuity’ is a payment by a customer which they assumed would be kept by the employee or shared with other employees.

It is either:

Voluntarily made to, or left for an employee of group of employees

Voluntarily made to an employer

Q: What are the new rules on tips and gratuities and service charges?

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 introduces new rules about how employers share tips, gratuities and service charges amongst employees. It also makes it illegal for employers to use tips or gratuities to make up basic wages.

The legislation will be reviewed after one year to assess its effectiveness and decide if further measures are needed.

Restrictions on the use of ‘service charges’

Voluntary service charges are the same as a tip or a gratuity. Mandatory service charges are charges that must be paid by the customer, on top of the cost of the product or service.

Employers are banned 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 electronic tips or gratuities.

This means mandatory service charges can only be added to a bill if the money goes to employees.

Q: What are the rules on how tips or gratuities must be 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.

Electronic tips and cash tips received by the employer must be distributed fairly and in a transparent way. Employers can consider certain factors when deciding how to distribute tips, including:

Seniority or experience

The value of sales or revenue generated

The number of hours worked

Whether the worker is on a full-time or part-time contract

The worker’s role in service delivery

Your employer must give you a statement of the tips and gratuities distributed, including the total amount of electronic tips received in a particular period and how much was paid to you. You must get this statement within 10 days of the tips and gratuities being distributed.

Cash tips are often paid directly to the worker. If these are managed by employees themselves, for example under a ‘tronc’ system, the distribution rules above do not apply.

However, employers must set out how cash tips are distributed in its publicly displayed Tips and Gratuities Notice’

Q: What us the requirement to display a ‘Tips and Gratuities Notice’

Customers have the right to know what service charges are used for and who they go to. From December 1, 2022, employers must clearly display their policy on how cash and card tips, gratuities and service charges are distributed.

The 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

Q: How are the rules re tips & gratuities enforced?

All electronic tips received by the employer must be distributed fairly and in a transparent way. This will be inspected through the Workplace Relations Commission (WRC). This can order an employer to reimburse any unlawful tip or gratuity deductions.

Q: How do I make a complaint?

If you are not getting the tips you are due, you should speak with your employer first.

If you cannot resolve the problem with your employer, you can complete the online complaint form on workplacerelations.ie.

You must make your complaint within six months of the dispute or complaint occurring. 

This time limit may be extended for a further six months, but only where there is a reasonable cause which prevented you from bringing the complaint within the normal time limit.

More information: Phone lines in South Munster Citizens Information Cork City are monitored from 10am to 4.30pm, Monday to Friday. In addition, the Cork City Centre CIC in Cornmarket Street is open to the public from 10am to 12.30pm, Tuesdays and Thursdays, while the Blackpool CIC is open to the public each day from 10am to 1pm, Monday to Friday. Full details for Citizens Information Centres on their website.