The Government is to bring forward new legislation to ban employers using service tips to help pay workers’ wages, and require businesses to display their policies on tipping.
Restaurants and other businesses would be required to display how tips and service charges are allocated, such as if and how they are distributed to staff.
Under the proposed changes, employers would no longer be allowed to use tips to bring employees’ pay into line with their contractual wage.
Currently in some establishments, service staff may receive less than their contracted wage from their employer, on the basis their pay is supplemented by tips from customers.
The amendment to the Payment of Wages Act is being prepared by Minister for Employment Affairs and Social Protection Regina Doherty.
Announcing the proposed changes, Ms Doherty said “tips should be a gratuity and should not be used to make up the agreed wage of an employee.”
“Despite the complexity involved, I am very open to exploring proposals for effective measures to ensure employees always receive the tips due to them,” she said.
“When a customer provides a tip after satisfactory service, they should know exactly where that money goes,” Ms Doherty said.
Department officials are currently awaiting legal advice on the draft Heads of Bill for the legislation. It is expected a memo on the new legislation will be brought to Cabinet in the coming weeks.
The Government is opposing a similar opposition bill from Sinn Féin, which would ensure low paid workers receive all tips due to them. The proposed legislation is due to be discussed in the Seanad this week.
The Low Pay Commission has advised the Government against supporting the Opposition bill, due to some unintended consequences it may have, such as reclassifying service charges, and possible knock-on tax implications for service workers.
Department officials are drafting a narrower amendment to existing legislation, in order to avoid “falling foul” of the pitfalls identified by the Low Pay Commission, Ms Doherty said.
The Minister described the Opposition legislation as a “blunt instrument,” which “may actually act against the interests of those it seeks to protect.”
Ms Doherty said “I believe that all sides of the House want something done to ensure that low paid workers who depend on tips are properly protected.”
Once enacted the legislative changes would be subject to a review after a certain period, to examine if any further changes would be necessary.
Earlier Ms Doherty warned the Seanad that the Opposition legislation before it would actually result in all tips being taxed, the Minister for Employment Affairs has warned.
Ms Doherty said the Government could not support the Sinn Féin Bill which aims to give workers’ tips legal protection, because it would have “a lot of unintended consequences” including negatively affecting workers’ social welfare entitlements.
The Seanad will on Wednesday debate the final amendments to the Sinn Féin private member’s legislation, the 2017 National Minimum Wage (Protection of Employee Tips) Bill.
Ms Doherty said she totally agreed with the Bill’s aims but “I cannot in good conscience agree with the unintended outcomes the Bill will produce if we pass the legislation”.
Sinn Féin leader Mary Lou McDonald asked in the Dáil if the Government would back the legislation which had received cross-party support in the Seanad and significant backing from the trade union movement, “particularly ICTU, and the ONE Galway and ONE Cork organisations”.
Ms McDonald said the legislation would make it illegal for an employer to withhold or deduct employees’ tips and would require businesses to display their tipping policy so customers know how tips are distributed.
But the Minister said however that the outcome of the Bill would in fact be “employers managing tips on behalf of employees.
“It would therefore result in all tips being taxed, which would have a negative outcome for the income earnings of the people who work in that relatively low-paid industry in the first instance.”
Ms Doherty defined a tip as a “a gratuity from the patron of an organisation to reward good service”.
She said the Sinn Féin legislation “would also have serious financial implications for people’s working family payments and medical card applications. There are a lot of unintended consequences of the Bill that I do not think Sinn Féin meant.”
Instead she proposed to amend the Payment of Wages Act “to ensure that tips cannot form part of anyone’s wages and that tips are just that: a gift or gratuity between a patron body and a service.
“In addition, we have agreed with the industry a code of practice on transparency of the tips policy of each individual organisation.”
