Now you can be sure your tip is going to the right person.

New legislation to ensure that staff in the hospitality, hairdressing, taxi, tourism, and delivery services industries get paid their share of all tips left by customers comes into effect today.

The Payment of Wages (Tips and Gratuities) Act 2022 introduces new rules around how employers share tips, gratuities, and service charges amongst employees.

It will also make it illegal for tips, gratuities, and service charges to make up part of an employee’s basic wages. After December 2023, the Act will be reviewed to determine its effectiveness in the industries and to implement further action if required.

Here’s what you need to know as a customer: The Act mandates that if a ‘mandatory service charge’ is added to a customer’s bill, the charge must be applied in the same way as electronic tips or gratuities to employees. This means once a customer sees ‘mandatory service charge’ on their bill, they know the value is going to the staff of the establishment.

Employers must also display their service charge policy so customers can request to read it if they wish.

The Act also states that staff will now have a right to a share of tips paid electronically and requires equal distribution of tips, gratuities and service charges according to the experience of the staff, the seniority of the employee and the number of hours worked.

‘Remove tips from the tax net’

While the legislation will create fairness and transparency around how tips are distributed amongst employees, the Government has been urged to consider removing tips – or a certain amount of tips – from the tax net to encourage more workers back into hospitality and other low-paid sectors.

“A case could be made for the fact that PAYE employers are already allowed to gift employees up to €1000 in tax-free vouchers per year – this however is unlikely to impact the vast majority of bar staff, wait staff, hairdressers, beauticians and other professions who receive tips.” said Shane McLave of Excel Recruitment.

“A really progressive move could be to introduce a similar scheme for employers and employees in service industries so that workers might be able to receive tips up to a certain threshold without incurring a tax bill.”