What’s really happening to the tips you give, now that the law has changed?

‘Tis the season to be dining out, nicely coinciding with the one-year anniversary of the new law about how tips and service charges (SC) are handled.

There were many wins for workers’ rights to their tips, and clarity for consumers, in the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022, overseen by Leo Varadkar when he was at Enterprise, and which came into force last December.

You’d imagine it was done and dusted. But think about any menus you’ve seen over the past year – how many mentioned tips or service charges, or how they were to be handled? In places that added a service charge, say, to larger tables (sometimes larger being as few as four people) – did it say what would happen to this? How many times have you clocked a prominently displayed notice about an establishment’s tips policy? The law makes tips fairer now, but adherence to this aspect seems an exception rather than the rule.

The law

The legislation aims to provide clarity on tips, gratuities and service charges. It bans employers from using tips and gratuities to make up contractual rates of pay. Employers are obliged to “display prominently” their policy on the distribution of both cash and card tips – and it’s quite specific about the detail of this, with contravention being an offence.

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Electronic (card) tips must be distributed fairly, equitably and transparently. Service charges must be distributed to staff as if they’re card tips. This was a big win for diners and employees; contrary to what the public might reasonably have assumed about service charges being an obligatory or optional tip, until the new law, service charges legally belonged to the business. Cash tips paid directly to the worker aren’t regulated but the policy on all types of tip must be displayed. Staff should get a statement showing the amount of tips overall and the portion paid to the individual worker. The Workplace Relations Commission (WRC) is responsible for inspecting premises to ensure regulations are followed.

The Act requires the Minister for Enterprise, Trade and Employment to review the legislation after one year, to assess its effectiveness and whether further measures are needed. Enterprise this month confirmed that preparatory work on the review is under way within the department.

We thought we’d take the temperature ourselves, too.

The menus

The law states tips policy must be prominently displayed. This may be a notice on the wall rather than the menu, but surely a customer might reasonably expect some information on the menu and website; the menu is one thing every customer is going to see. Anecdotally at least, the legal requirement to prominently display tipping and service charge policy clearly for customers seems not to be generally followed.

We did an informal survey of menus in table-service hospitality outlets on Dawson Street and Temple Bar, two prominent Dublin dining areas. We checked menus displayed outside for an indication of tips/service charges policy. This was a non-comprehensive trawl on a quick scout, much as you might do before going in for a bite. We did not search inside for notices displayed.

This is what we found.

On Dawson Street, Featherblade steak restaurant menu makes no mention of tips/SCs. Bestseller cafe (also home to the excellent Glass Mask Theatre) menu has no mention of tips policy.

Marco Pierre White’s has 12.5 per cent service charge for parties of more than eight (six-plus for Christmas menus); Maneki Japanese restaurant’s menu says “12.5 per cent service charge will be added to bills”; Lennan’s Yard/Hayloft has 12.5 per cent service charge on parties of five-plus, Nannetti’s nearby, the same. None of these menus indicate how the service charge is handled.

The menu at Milano, part of a chain, is clear-cut and admirably detailed in a note at the bottom: a discretionary 12.5 per cent service charge (incl VAT) for groups of seven-plus can be included or not by customers. After VAT is deducted, the rest is divided among waiters and kitchen team. Any gratuity not on the bill, whether cash or card, is outside the scope of VAT. We’ve noted other Milano restaurants are among those that have detailed policies displayed inside too.

Cafe en Seine’s says 100 per cent of tips are received by staff, with a 12.5 per cent SC applied to groups of six-plus. Across the road, the menu at Fire has an optional 12.5 per cent SC for groups of six-plus, “all of which is shared fairly amongst the Fire team”.

Caffè Nero has a blackboard menu but an A4 notice in the window details its policies: no mandatory service charges; no SCs or tips taken electronically; cash tips go to staff, managed by the team, and the company makes no deductions.

Scanning menus in Temple Bar, again there is inconsistency in whether tips or SCs are mentioned on menus. Luigi Malones has a 10 per cent service charge for tables of six. Buzz’s huge crepes and gelato menu notes 10 per cent SC on tables of four-plus; Elephant & Castle’s menu says large parties of six or more have 12.5 per cent SC; Gallagher’s Boxty House’s menu says “Discretionary gratuity added on all groups of 6 or more”, but doesn’t specify what percentage; Mongolian Barbecue’s menu says a 10 per cent service charge will be added to tables of six-plus; Hellfire’s menu says a service charge of 12.5 per cent will be added to the final bill for groups of six-plus. None of these menus indicate how those service charges are distributed.

The Old Mill and the Quays both specify they have no service charge and do not mention tips.

Caffè Nero in Temple Bar doesn’t have the same window notice as its Dawson St branch. The Oliver St John Gogarty also sells food; its souvenir menu doesn’t mention tips. Neither do O’Shea’s, Thunder Road Cafe, The Fleet cafe, Bad Ass Cafe, Lucky Tortoise, Buskers in Temple Bar Hotel.

What do we learn from all this?

1. Most menus say nothing about their tips policies. Some may have a notice displayed inside (the legal minimum), but it’s not on the menu, which is the one place everyone would see it.

2. Some places still levy service charges on larger groups (which can be as few as four people), though legally these no longer belongs to the premises and must be treated as tips. In some places this service charge is optional/discretionary, but otherwise is effectively an obligatory tip. But hardly anyone actually spells out on the menu how they are handled.

3. Most hospitality premises probably manage tips fairly, and many staff will confirm this, but, mystifyingly, many places appear reluctant to spell this out for the customer.

4. Some restaurants where whistleblowers have previously told The Irish Times about tips and service charges being withheld, drawing attention to unfair practices (one factor that led to the change in law), have different policies now, and are clearer than other menus on their policies. The Ivy on Dawson St was at the centre of past controversy for withholding card tips, levying service charges on all tables and using that to part-pay basic wages. Now its menu makes no mention of service charge, and notes “all gratuities provided directly to a server are kept by the server. The restaurant deducts a 5 per cent admin fee to cover the processing of an electronic tip”.

Two other companies where staff in the past disclosed to The Irish Times how mandatory service charges were retained by management, the Hard Rock Cafe in Temple Bar and the TGI Friday’s chain, have since clearly changed their policies. The menus at both the music-themed Temple Bar cafe and the TGIF chain include on their menus: “Service charge not included. All tips & gratuities go directly to staff”. This seems to indicate that calling out unfair practices has an effect.

The inspectors

The independent, statutory WRC inspects workplace records to ensure employers’ compliance with employment law, including with the new Tips and Gratuities Act.

A year ago when the new law came in, a WRC campaign targeting employers and employees and visiting over 700 premises highlighted the legal changes on tips and gratuities (in sectors including hospitality, tourism, hairdressing, taxi and delivery services), letting employers know their obligations and employees their rights.

The Department of Enterprise points out the WRC operates on a compliance model, with inspections to bring employers into legal compliance. It aims for voluntary compliance with employment law including the required tips and gratuities notice and the obligation to provide employees with written statements explaining the distribution of tips, gratuities and service charges. It gives employers reasonable opportunity to rectify contraventions and its policy is to issue Compliance Notices or Fixed Payment Notices and/or initiate legal proceedings if an employer has failed or is unwilling to comply.

Between January 1st and November 31st, WRC carried out 4,270 inspections, with 393 contraventions (in 367 employers) detected under the tips law. Of the 393 contraventions 369 related to displaying a tips notice. The other 24 were for failing to give employees written statements specifying total tips/gratuities and their distribution.

Asked whether staff had lodged complaints about noncompliance, WRC said it can’t disaggregate tips and gratuity complaints from unlawful deductions complaints. By the end of October 2023, 150 complaints were made to inspectors, while WRC Adjudication received 274 complaints about unlawful deductions from wages and/or tips or gratuities. WRC said all detected breaches of the law were resolved with a contravention notice.

It’s interesting to note how the WRC decides where to inspect. It confirmed to The Irish Times that during 2022, the WRC closed 3,493 inspection cases (involving a total of 5,820 workplace visits). Some 67 per cent of the inspections were based on WRC risk assessments, informed by factors including “risk profiling of employers, complaints, intelligence, open-source information and referrals from other agencies and NGOs”. Other inspections were based on sectoral campaigns or referrals from other state partners.

The workers

Dr Deirdre Curran from the University of Galway has researched hospitality employment conditions and made submissions to the Minister for Enterprise on the necessary provisions of the new act during drafting. In October 2023, she conducted a short “pulse” survey of workers’ perceptions of the effectiveness of the Act. There were 26 responses from hospitality staff.

The survey, intended as a snapshot rather than a representative sample, found while most respondents (21/26) were aware of their legal right to tips and service charges, only two respondents said there was a notice, clearly displayed for customers, explaining how tips and service charges were divided.

Most respondents (19/26) didn’t see change or improvement since the new protections. In some cases, this was because they got their tips before the new law, or because they still don’t get their tips despite the new law, or because the move to card payments combined with inflation has reduced the amount of tips.

When asked whether they get an explanation for the amount of tips received, 10 out of 26 said they received none. For most of the others, staff themselves agree a system of division.

The types of systems in place include:

→ 20 per cent kitchen, 15 per cent bar, the rest divided evenly among wait staff

→ Front-of-house staff receive 80 per cent. Back-of-house receive 20 per cent

→ Divided evenly by waiting and bar staff on that working day

→ Split equally daily among everyone who worked that day/shift

→ Divided equally among all staff

→ Split among everyone working that day based on the amount of hours worked, with 30 per cent to the kitchen

→ Divided weekly, or per quarter

→ Tips go to front-of-house staff only

→ Staff keep their table tips

Interestingly, Dr Curran points out most descriptions seem to imply the division of tips only and there was no direct reference to service charges. When asked where they would go if they were not getting their legal right to tips/service charges, the most common responses were that either they would not know where to go or they’d approach someone in management. No one mentioned WRC. Her survey indicates the need for wider research, Curran said.

Some of the comments indicate a wide variation in how tips are handled, and perceived fairness. “Our tips system is fairest way in our workplace” and “tips are shared equally”. Another says an explanation is “not really necessary as we are all aware of how it is done and any member of staff could split them on a given day”. “We see the tip jar daily and trust each other to split fairly.” Another notes “slight improvements” since the change in law.

Among those who noticed no improvement, one observes: “No improvement, a lot of people don’t tip any more because they have no cash and they aren’t aware they can tip on card machines. And recently since the tax went up on food etc there has been a slight decrease.”

While one observes their tips’ distribution is “explained to us and all staff are encouraged to get involved in the dividing of the tips “, another sees “No changes at all and no information from managers about changing of procedures”.

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Other comments on distribution include: “We get our tips in an envelope and no explanation. We just presume it’s divided fairly.” “No [explanation]. the managers get more tips than the staff.”

“We don’t get a statement we just get our tips in an envelope.”

“No, I do not get a statement. I receive my tips in an envelope with my name written on it.”

“Managers [get a share of tips] but not the employer.”

“No, the tips are just divided up by the number of people who were working on the counter that day, however this has always felt a little unfair because sometimes those working on weekends (part-time) get more because it’s a busier period.”

“Just divided out.” “Depending on how many hours you worked and 20 per cent go to the kitchen.”

The restaurants

Notices about tips policy do not need to be on the menu, according to the legislation, but can be displayed prominently within the restaurant, Restaurants Association of Ireland chief executive Adrian Cummins points out. He suggests it could, for example, be near the premises’ licence, or its no smoking sign.

Restaurants are well aware of their new obligations, he says. He’s noticed in some places “the wording is wrong. The WRC is very specific in the wording that should be displayed. You have to dot all your Is and cross your Ts.”

Some feedback from staff through their managers indicates unhappiness that card tips are subject to taxation, whereas cash tips are outside the scope of Revenue, he says, adding a lot of businesses have moved to cash only, because of this. He has observed some card machines now offer cashback (enabling cash tips). “The staff are demanding it because they don’t want to be paying the tax.”

One year on, “businesses know what they need to adhere to, and if a business falls foul of the legislation it’s their own fault in my opinion because they are well advised [by WRC and RAI] on what’s required. They should be very familiar with the requirements. It’s the norm now, and the law has to be adhered to. Ninety-nine per cent of businesses don’t want to be on the wrong side of the law.” Those who do break the law “don’t help the rest of the industry. It was the one case that was highlighted that caused a lot of upheaval in terms of our industry. Nearly everybody was tarred with the same brush. And we’ve an awful lot of good restaurants” who operate fairly.

“A year ago the tips legislation was top of the priority list. The top of the priority list now is in terms of trying to survive.”

Cummins points out, too, that “I haven’t seen one notice at all in barbers I’ve gone into” and presumes the same for hairdressers. The tips legislation applies to other sectors as well as hospitality; “What’s good for the goose is good for the gander. Fair is fair.”

Asked if he thinks the majority of restaurants have adequate notices up, he says “I’m not out in restaurants every night but the ones I’ve been in, I’ve been comfortable with their policy and how they’re applying it within the legislation. Nobody has been prosecuted over the past year under the legislation.”

The diner

For those dining out over the coming season, what are the lessons?

⇒ Remember to have some cash on you when heading out if you can.

⇒ Be observant early on: is the tips/SC policy on the menu, or can you see a notice displayed in the restaurant? (Prominent display of card and cash tips policy is a legal obligation.)

⇒ When you’re paying, ask the server if their tips (cash, card, service charges) are distributed fairly. Most staff say they’re very happy when customers ask how tips are handled.

⇒ If tipping electronically, specifically ask how card tips are handled. If there’s a service charge and it’s discretionary/optional, you may ask for it to be removed so you can tip instead. If you’re paying a service charge, it’s effectively an obligatory tip, and legally must be treated the same as tips.

⇒ If you’re asking your server about any of this, ideally do it discreetly so they are free to answer honestly.

Remember, you’re there to enjoy yourself, and if you leave something extra for staff, it’s good to feel confident they get it. The new tips law helps build that confidence.

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