Legislation is set to be introduced to ensure service charges in bars and restaurants go directly to workers.
The move will be brought forward as part of a new Bill on tips that is before the Seanad on Wednesday afternoon.
The amendment to the Bill also means customers will no longer be asked to pay mandatory service charges at restaurants or pubs.
The law will ban employers from placing a mandatory service charge unless those payments are treated by the employer in the same way as electronic tips or gratuities.
Any additional charges that are not going to staff must be now be explicit.
The amendments will be brought to the Payments of Wages Tips and Gratuities Bill on Wednesday afternoon and will rename “mandatory service charges” as “mandatory charges”.
Tánaiste Leo Varadkar said: “Our overall objective with the Bill is to prevent employers from using tips or gratuities to make up basic wages and to introduce transparency about how tips and service charges are distributed.”
He added: “I’m happy we’ve been able to come up with a solution now, which will effectively ban employers from using the term ‘service charge’ or any similar term, unless the money goes straight to staff. Employers must be explicit about any additional charge and where it goes, once this new law comes into force.”
Sinn Féin Senator Paul Gavan praised the trade union campaign that sought changes to hospitality charges.
“While this Bill isn’t perfect, it goes a long way to dealing with the issue of tip theft which has been costing employees hundreds of euros each year,” he said.
“All credit for this massive win for hospitality workers belongs to the OneGalway Alliance of unions and students, SIPTU, Unite and USI.
“The workers who courageously told their stories of tip theft were crucial in winning public support. They were relentless in pushing their just demands and made it a live issue in the last general election campaign. It just shows what’s possible when workers, activists and the public get behind a campaign.”