Using tips to subsidise wages to be outlawed

Peninsula Team

June 27 2019

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Using tips to subsidise wages to be outlawed The hospitality sector will be closely watching recent developments in relation to the treatment of tips and gratuities. Minister for Employment Affairs and Social Protection, Regina Doherty announced this week that she will introduce new measures which will prohibit employers from using tips and gratuities to make up contractual wages. The new measures are designed to ensure fairness for workers and greater transparency for customers. How would the new law work? The government is working on an amendment to the Payment of Wages Act which will specify that employers are not permitted to use tips to make-up or satisfy payment of contractual rates of pay. The amendments will also require employers to clearly display their policy on how tips, gratuities and service charges are distributed in their premises. Existing Sinn Féin proposals The Seanad passed existing draft legislation in relation to the treatment of employee tips this week despite government opposition. Sinn Féin proposed the National Minimum Wage (Protection of Employee Tips) Bill 2017 which if enacted will provide employees with a legal right to keep their tips. Minister Doherty confirmed during this week’s Seanad debate that the government will oppose the Sinn Féin proposals on the basis of guidance from the Low Pay Commission. Low Pay Commission guidance The Low Pay Commission issued a report to the government that strongly advised against introducing heavy regulation or primary legislation on the treatment of tips. The Commission warned that there could be unintended negative consequences for low paid workers leading to a potential reduction in their take-home pay. New measures to protect low paid workers The announcement of the new measures on tips follows the recent enactment of the Employment (Miscellaneous Provisions) Act which provided increased safeguards to employees in precarious employment. The government’s most recent objective is to provide further protections to low-paid workers by introducing effective measures that ensure employees always receive the tips due to them. Impact on hospitality sector It is unclear at this point what employers will need to do to demonstrate that they have complied with the new measures. Although the hospitality sector is already under pressure from VAT hikes and increasing National Minimum Wage rates, it is likely that the proposed legislation will be welcomed on the basis that it provides more transparency for staff, customers and restaurant owners in the wake of recent media scrutiny into the variety of tipping practices being used by employers across the sector. Is your business affected by these changes? If you have any questions in relation to national minimum wage or payment of wages, please contact Peninsula’s expert employment law advisors on 1890 252 923. Or if you would like one of our advisors to call you back, fill in your details here.

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