Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am pleased to introduce the Payment of Wages (Amendment) (Tips and Gratuities) Bill 2022 to the House. The Bill enjoys significant cross-party support. I acknowledge the contribution of Senators, whose thoughtful contributions have helped us refine and improve the Bill. I also acknowledge my colleague, the current Leader of the Seanad and former Minister for Employment Affairs and Social Protection, Senator Regina Doherty, who initiated this legislation. I also acknowledge Sinn Féin and Labour Party Oireachtas Members who produced Private Members' legislation on this matter. I further acknowledge the trade union movement, including Unite and SIPTU.

Until now, there has been no legislation which requires employers to pass on tips and gratuities received from customers to their employees. Tips and gratuities are a common feature in the hospitality sector and in some personal services. The vast majority of employers treat their staff fairly, and I acknowledge that. Unfortunately, there is evidence that some employers use tips as part of overall business income or use them to make up employees' contractual wages. That is not right.

This Bill makes some legislative changes to ensure there is fairness and transparency in the distribution of tips and gratuities in the sectors where these are common. The Government's position is that overly burdensome regulation in this space is not necessary but that certain objectives must be achieved through appropriate regulation.

I want the hospitality and service sectors to be seen as a valued and sustainable career choice. This Bill will bring clarity and transparency to how tips are treated and will bring benefits to large numbers of often low-paid workers and migrant workers in these sectors. Tips can form a significant percentage of a worker's take-home pay. This Bill will ensure that tips are distributed to the people who have earned them. Making sure of this is all the more vital given the cost-of-living crisis emerging as a result of the series of external shocks brought about by the monetary policy of world central banks, Covid and, most recently, the Russian invasion of Ukraine.

The Bill passed through Second Stage in the Seanad in February. Following that debate, we refined elements of the policy relating to the treatment of mandatory service charges. The Bill before the Dáil today has been amended to respond to some of the issues raised by Senators.

This Bill has three objectives. First, it will prohibit employers from using tips and gratuities to make up contractual rates of pay. This ensures that tips and gratuities will be additional to a worker's contractual earnings. Second, employers will be legally obliged to distribute tips and gratuities paid in electronic form, such as by debit or credit card, to their workers. This is all the more important when fewer people are using or carrying cash. People often now leave tips in electronic form. The Bill requires that these tips and gratuities should be distributed in a fair and transparent manner. If there is a dispute, the Workplace Relations Commission can adjudicate on whether the approach taken by an employer is fair and transparent. Where money is not handled by the employer at all, such as is the case with regard to cash tips or some of the new applications people can use to leave a tip, this Bill will not interfere with arrangements that employees have made privately with one another.

The Bill will also require businesses to display clearly their policy on how tips, gratuities and mandatory charges are distributed.

This transparency is to the benefit of employees and customers. It will not prevent business owners from imposing other surcharges, for example, for group bookings, where often they have to hire additional staff at a premium. However, it will be clear that it cannot be described as a service charge unless it is treated as though it were a tip or gratuity.

Following amendments in the Seanad, employers will also be prohibited from describing mandatory charges as “service charges” unless they are treated in the same way as tips or gratuities, as I said earlier. This will provide clarity for customers on how certain charges are used. It is also important to stress that this does not interfere with the right of a business to impose mandatory charges on customers for additional services. However, if the charge is called a "service charge" or something similar, then the employer must pass it on to employees as though it were a tip or gratuity.

We have taken this approach to eliminate uncertainty for customers and staff as to what the purpose of service charges is. This is preferred over an outright ban on services charges in hospitality or other defined sectors. Banning mandatory charges outright could have adverse or unanticipated consequences for employees, employers and consumers.

A most important objective of the Bill is to provide a legal entitlement for workers to receive tips and gratuities paid in electronic form. These tips and gratuities should be paid out to workers in a fair and transparent manner. To ensure this, the employer will be required to provide a statement to workers showing the total amount of electronic tips obtained in a period and the portion paid to the individual employee for that period.

Employers will also be required to include in detail how cash tips are dealt with in their tips and gratuities policy. There will be no other regulation of cash tips because the Workplace Relations Commission, WRC, advises that it would not be workable. Cash tips are not accountable and may not be under the control of the employer. This means there is no clear evidential trail if there is a complaint.

In contrast, payment of tips and gratuities by electronic means is under the control of the employer and they can control how these tips and gratuities are distributed. The pandemic saw a large-scale movement away from cash, much of which has been sustained as we move to a more normal way of life. Payment of tips by electronic means is becoming the predominant way of tipping staff. The electronic record generated by this payment method will facilitate investigations by the WRC in the event of a complaint.

On redress, a WRC adjudication officer may take into account certain factors when determining whether tips were distributed fairly. These factors include the seniority or experience of the employee, the value of sales generated by the employee and the number of hours worked.

There will be no interference with schemes where tips are managed by employees themselves, for example, under a tronc system. These will continue to operate as they currently do. There will also be no change in the tax treatment of tips and gratuities.

The Bill provides for a review clause under the Act, which will be reviewed after one year in operation, when employers, employees and customers all have experience of how the legislation has worked in practice. Further changes and modifications to policy can be considered in light of that understanding.

There may be a minor cost to employers in complying with the new regime this Bill introduces. This includes having to prominently display a statutory notice of the employer's tips and gratuities and mandatory charges policy. However, information and guidance will be provided by my Department and the WRC to assist employers to develop their own policy and to help them identify the types of information and procedures that should be outlined and displayed in their policy. There will, of course, be engagement with the representatives of these sectors before final sign-off.

Most establishments already treat their employees fairly with regard to tips. For these businesses, the Bill will have little impact. They will simply have to display their policy clearly. However, other businesses will have to review how they operate and how they treat their employees. Their employees can have recourse to the WRC if they have a complaint.

For customers, the requirement for establishments to clearly show how tips are distributed and to whom they go will ensure transparency. It will provide reassurance that tips and gratuities left for staff will be distributed as the customer intended. This goes for whether you pay by cash or card. The requirement that the employer must provide a statement to employees showing the amount of electronic tips obtained in a period and the proportion paid to the individual employee for that particular period will ensure transparency for employees.

The Bill will further improve the rights and entitlements of workers. It builds on a set of legal rights that the Government is introducing to protect workers. These include the new annual public holiday, the Sick Leave Bill, which is currently making its way through the Houses, the transparent and predictable working conditions directive, the right to request remote working, the right to request flexible working, the living wage and, indeed, the move towards a national pension scheme, or auto enrolment, so that all workers have an occupational pension to top up their State pension. I firmly believe that these improvements to workers' rights are essential to recruit and retain the staff that we need to drive our enterprise economy forward. I also believe they are essential in our efforts to build a more just society.

In conclusion, the Bill will improve the rights and entitlements of workers, largely in the hospitality industry where pay rates are often low, and it will provide welcome transparency and reassurance for customers. I commend the Bill to this House.

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