From 1 December 2022 the law in relation to tips and gratuities for service workers is set to substantially change.


The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 ("the Act") introduces new requirements on employers in relation to the sharing of electronic tips and gratuities, including the requirement to provide relevant employees with a policy on electronic tips and gratuities within five days of commencing employment. This article sets out some brief guidance, particularly for employers in the hospitality and service sector, to ensure they are ready for the changes due to come into effect this week.

The Act provides that employers must distribute electronic tips or gratuities and/or service charges to employees in a fair manner and must have a policy documenting how tips or gratuities and/or service charges are distributed. The Act also makes it illegal for employers to use tips or gratuities and/or service charges to make up basic wages for employees. The Act applies to a number of sectors including hospitality, beauty and hair services, guided tours, gaming, bookmakers and transport services such as those provided by taxi or minibus. The Act provides that mandatory service charges can only be described as such if the entirety of the service charge is distributed to staff and seeks to prohibit the use of misleading language in the area of service charges.

A ‘tip or gratuity’ is defined in the Act as a voluntary payment made by a customer to, or left for, an employee or group of employees which they intended or assumed that the payment would be kept by the employee or shared with other employees.

A 'mandatory service charge' is a contractually imposed and receipted payment that a customer must pay in addition to the cost of services or goods.

From 1 December 2022 employers will need to have a policy in place which explains to employees how electronic tips or gratuities and/or service charges are to be distributed going forward. Importantly an employer must now include this policy in relation to the distribution of tips and/or gratuities in the employee's core terms and conditions of employment which must be provided within 5 days of commencing employment.

Employers are required to consult with employees in relation to this policy. However, employers do not need consent from employees before implementing the policy or amending it. Employers can have regard to a number of factors in relation to the distribution of tips or gratuities amongst staff including seniority or role, hours worked and/or length of service of employees. Employers are also required to provide employees with a statement setting out the amount of tips or gratuities received within a specific period and how these tips or gratuities were distributed amongst staff. The statement should be provided within 10 days of the distribution of the tips or gratuities.

The Act also provides that where an employer engages contract workers or platform workers the employer must have a separate policy for these workers which sets out whether tips or gratuities and/or service charges are distributed to these specific workers and if so in what manner.

There is a further and separate obligation on employers to display a 'tips or gratuities notice' in public which clearly explains to customers how tips or gratuities are distributed amongst staff. As cash tips are usually provided directly to employees from customers there is no requirement to regulate the distribution of cash tips amongst staff. However, there is a requirement in this customer notice to explain to customers how cash tips are dealt with.

Employees with over one month's service can now bring a number of complaints to the Workplace Relations Commission ("WRC") in relation to tips or gratuities or service charges. These include a claim that they did not receive the electronic tips or gratuities policy, a claim that the policy on electronic tips or gratuities is not fair, a claim in relation to unlawful deductions of tips or gratuities and/or a claim in relation to an unlawful retention of tips or gratuities. Where an employee succeeds in these claims an employee may be awarded compensation not exceeding four weeks’ remuneration. The WRC also has powers of inspection and can request to carry out an inspection of a premises and seek to review the tips or gratuities policy and/or customer notice.

Furthermore, an employer who contravenes specific sections of the Act shall be guilty of an offence and shall be liable on summary conviction to a class C fine, up to a maximum of €2,500.

If you have any queries on this new Act or wish for us to assist in amending or drafting employment law policies, please contact Kate Field (Managing Associate),  Rachel Kennedy (Associate) or any member of the Addleshaw Goddard (Ireland) Employment Law team.

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Kate Field

Kate Field

Managing Associate, Dispute Resolution & Employment
Dublin, Ireland

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Rachel Kennedy

Rachel Kennedy

Associate, Dispute Resolution
Dublin, Ireland

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