Hospitality ‘service charges’ to be banned unless going straight to staff

Customers will no longer be asked to pay mandatory “service charges” at restaurants or pubs under new plans being brought forward by Tánaiste Leo Varadkar.

The move will be brought forward as part of a new Bill on tips that is before the Seanad on Wednesday afternoon.

The amendment to the Bill will effectively ban so called service charges unless the charge goes straight to staff.

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“Our overall objective with the Bill is to prevent employers from using tips or gratuities to make up basic wages and to introduce transparency about how tips and service charges are distributed,” Mr Varadkar said.

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“Customers really can’t be sure what services charges are used for or whom they go to. Voluntary services charges are clearly the same as a tip or a gratuity but by definition, mandatory service charges are not. As things stand, you’re expected to pay, without any information on where the money goes,” he said.

“I’m happy we’ve been able to come up with a solution now, which will effectively ban employers from using the term ‘service charge’ or any similar term, unless the money goes straight to staff. Employers must be explicit about any additional charge and where it goes, once this new law comes into force.”

The amendments will be brought to the Payments of Wages Tips and Gratuities Bill this afternoon and will rename “mandatory service charges” as “mandatory charges”.

The law will ban employers from placing a mandatory service charge unless those payments are treated by the employer in the same way as electronic tips or gratuities.

Any additional charges that are not going to staff must be now be explicit.

Speaking previously about the Bill, Mr Varadkar said there has been “anecdotal evidence that a minority of employers, particularly in the restaurant and hospitality sectors, use tips or gratuities – given by customers and intended for staff – as a means of meeting their payroll obligations and other overheads”.

“Currently, there is no legislation which obliges employers to pass on any tips received by them to their staff. Therefore, a customer has no way of knowing if the tip they left was given to the intended recipient or recipients and the worker has no protection if their employer chooses to keep some or all the tips left by customers.”