Following an article we published in recent months regarding the new legislation for the payment of tips and gratuities; The Payment of Wages (Amendment) (Tips and Gratuities) Act, 2022, we have had queries on our free HR Helpline about what is required from employers to prepare for this new legislation.

What does the new legislation say?

This new law gives employees legal rights on the payment of tips. The key points of the legislation are:

  • Employers can not use tips to make up an employee’s basic wage or make deductions from an employee’s wage in respect of tips and gratuities made to an employee;
  • Employers must clearly display their policy on tips and gratuities for customers clarifying how they are distributed; and
  • Employers may not use the term ‘service charge’ or similar unless the gratuity goes directly to staff.

When does this new legislation come into effect?

Employers have until the 1st of December to prepare for this new legislation, on which date the new law comes into effect. 

As an employer, what do you need to do to prepare for this legislation?

Employers must display their policy on the distribution of both cash and card tips prominently. This policy, or “tips and gratuities notice”  must be displayed on the premises, clearly stating:

  • whether or not tips or gratuities are distributed among employees;
  • where tips and gratuities are so distributed, how they are distributed and the amounts so distributed;
  • whether mandatory charges or any portion of them are distributed, how they are distributed and the amounts so distributed.

Employers will be required to distribute tips and gratuities fairly and equitably. Workers should be provided with a statement showing the total tips obtained and the percentage paid to them in respect of the period they worked, no later than 10 days from the date on which the distribution is made. Employers must consult with employees if they wish to change how tips and gratuities are distributed. 

What determines if the distribution of tips is fair?

A fair distribution of tips will depend on the context, and will take into account factors such as the seniority or experience of an employee, the value of sales generated by them, the number of hours worked, whether the employee is full-time or part-time and whether the employee was consulted about the manner of distribution. Any charge called a ‘service charge’ or anything that would lead a customer to believe it is a service charge will have to be distributed to staff as if it were a tip or gratuity received by electronic means.

Who will this new legislation apply to?

The main sectors to which the Act will apply are tourism, hospitality, hairdressing, taxi, and delivery services.

Employers should review their current policies to ensure that they are compliant with the new legislation, ahead of its introduction on the 1st of December 2022.