Dr. Donal de Buitléir:

I thank the members for inviting me to talk about the legislation the Minister for Employment Affairs and Social Protection, Deputy Regina Doherty, is introducing. The primary remit of the Low Pay Commission is to make recommendations each year to the Minister on the appropriate rate of the national minimum wage.

The national minimum wage establishes a pay floor below which no one should be expected to work. The commission seeks to recommend rates that will help as many low-paid workers as possible without any significant adverse impact on employment or the economy. While the primary role of the commission is to make recommendations on the national minimum wage we are also tasked, at the request of the Minster, to examine what is referred to as “related matters”. Since its establishment, the commission has reported on a number of issues, such as the preponderance of women on the national minimum wage, the sub minimarates of the national minimum wage, the allowances provided for board and lodgings and, most recently and the subject of this discussion, current practices in regard to tips under the national minimum wage.

In February 2018, the Minister invited us to examine the practice in regard to tips and gratuities as part of our work programme for last year and to make any recommendations we might consider appropriate. To help us prepare the report, we invited submissions from key stakeholders and individuals. We also advertised for submissions from the public. We engaged with the Workplace Relations Commission, WRC, and the Revenue Commissioners to gain further knowledge and insight into enforcement procedures and taxation matters, respectively. We also examined practices in other jurisdictions and considered how they might be applied in Ireland.

As with all of the commission's work, the consultation provided us with information that greatly assisted us in reaching our recommendations. Some submissions felt that employees should have more control over their tips and others favoured codes of practice. The Revenue Commissioners and the WRC were able to provide us with advice on the practicalities of introducing legislation in this area. What was clear from all of our engagement with stakeholders was that legislation or over-regulation in this area could result in a number of unintended consequences, which could result in less take-home pay for those employees concerned.

The Low Pay Commission's report reviews current practices and current legislation, sets out the consultation undertaken, the inputs received from Departments and agencies, a literature review, and then outlines our conclusions. In order to better understand tipping practices and the options available to Governments, the commission also examined selected international tipping regimes to look at best practice in other countries. The majority of submissions received by the commission advocated legislation focused on the hospitality sector. However, the consultation process has shown that tipping practices are prevalent in a number of other sectors. While there was broad agreement that the withholding of tips by employers is wrong, there was not agreement as to how this should be addressed.

Let me take members through the conclusions of the commission's report.While a number of groups have conducted some ad hocsurveys in this area, the commission was of the view, that insufficient data exist to show that employers withholding tips is a significant problem in Ireland. The commission concluded that regulation in this area could result in a number of unintended consequences, such as the reclassification of service charges, leading to a potential reduction in the take-home pay of low-paid employees. We also received a clear message from the WRC that legislation in this area might not be enforceable. The WRC emphasised that for enforcement to be viable and a conviction to be secured, it was essential to establish and clearly quantify the proportion of tips each employee is entitled to. The WRC has stated that, in its view, a better approach than legislation would be to introduce a code of practice on tipping. Furthermore, regarding legislation, while there was some support for legislation for the hospitality sector put forward in the submissions we received, the commission is of the view that this may not be appropriate for other sectors. Essentially, a one-size-fits-all approach is not recommended.

The commission noted that the advantage of such an approach would be that a code of practice could be tailored to the specific requirements of the industry involved. A code of practice could also ensure that both employer and employee interest groups are able to give input into the development of such a code and may therefore be able to take better account of issues as they exist on the ground. The commission concluded that, based on the experience in the UK, there is the strong possibility that if a code of practice were to be introduced in Ireland, it would not have the desired result in terms of ensuring that employees receive a fair share of their tips. The commission considered that there has not been a great deal of pressure from either employee or employer representative bodies to legislate for tipping or to alter current practices. The commission noted that this may indicate that the systems currently in place were working relatively well and that any attempt to interfere may lead to unintended consequences or legislation that would be difficult to enforce.

The commission's report was agreed by all nine members.