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

I am pleased to introduce the Bill to Seanad Éireann. I have set three objectives in my role as Minister for Enterprise, Trade and Employment. These are as follows: to help businesses respond to Covid and Brexit and to survive and prosper again; to restore and exceed pre-pandemic employment levels by achieving a target of a record 2.5 million people at work in Ireland by 2024 and ensure there are job opportunities in all parts of the country; and to create jobs with better terms and conditions, that are more sustainable, secure and valued. As part of implementing this third policy, I plan to establish five new workers' rights this year. These are a new public holiday, statutory sick pay, the right to request remote working, new rights around redundancy for people laid off during the pandemic, and better protection of workplace tips.

As today is 1 February, it is fitting to mention that from next year we will have an extra public holiday at the start of February to mark Imbolc or St. Brigid’s Day. It will be observed on the first Monday of February, except where 1 February falls on a Friday in which case it will be observed on that day. This will be the first Irish public holiday named after a woman who is also a Christian saint. It marks the half-way point between the winter solstice and the equinox at the beginning of spring which was the Celtic new year. The creation of a tenth public holiday will also bring Ireland more into line with the European average.

Turning to the Bill before the House on tips and gratuities, I acknowledge the role of the Leader of the Seanad, Senator Doherty, in its development. She made significant progress on it during her time as Minister in the last Government and I look forward to working with her and all of the House as we bring it through the Oireachtas. I also acknowledge Senators Warfield and Gavan, and former Senator Ó Clochartaigh, for their Private Members' Bill on this matter in the previous Seanad. I am aware that other parties had different proposals to the Government. I am sure this Bill is not perfect and can be improved, and I am open to amendments that are workable, beneficial and constitutional. I thank the Low Pay Commission and the Workplace Relations Commission for their practical advice on this matter.

On the face of it, this seems like a straightforward issue. As is often the case, when we delved into it more and more we found it was not. It is difficult to find the right way to approach some of the nuances. We have done the best we can to do so. To provide some background and context, there has been anecdotal evidence that a minority of employers, particularly in the restaurant and hospitality sectors, sometimes use tips or gratuities given by customers and intended for staff as a means of meeting their payroll obligations and other overheads. There is no legislation which obliges employers to pass on any tips received by them to their staff. Therefore, customers have no way of knowing for sure whether the tips they left were given to the intended recipient or recipients, and the workers have no protection if their employer chooses to keep some or all the tips left by customers.

While most employers treat their staff very well, we have all heard stories that some tips are simply included as part of overall business income or used to contribute to employees' contractual base wages. With this in mind, a Bill was brought forward by Senator Doherty when she was Minister for Social Protection. It underwent pre-legislative scrutiny before the Joint Committee on Employment Affairs and Social Protection on 10 October 2019 and the committee’s report was published on 11 November 2019. The legislation fell when the general election was called in early 2020.

The Low Pay Commission and the Workplace Relations Commission have advised that heavy regulation in this area is not necessary and could even backfire by undermining some informal arrangements that are working well from the point of view of workers. We have also been strongly advised that trying to regulate cash tips too tightly would be unenforceable where those cash tips are controlled by staff and never go through the employer's books. The main sectors to which the Bill will apply are tourism, hospitality, hair and beauty, taxi and delivery services but legally it will apply in all settings and this needs to be borne in mind. This is not just about restaurants and bars.

I emphasise that it is important that the tourism and hospitality sectors are seen as valued and sustainable career choices. The Bill will bring clarity and transparency to this important aspect of the tourism sector work experience. These sectors tend to attract younger people, students and migrant workers for whom English is often not their first language. A recent survey undertaken by Unite the Union, along with research carried out by Dr. Deirdre Curran of NUI Galway, found that a significant number of workers simply do not know their employment rights. The Bill will have a beneficial impact for all these groups and will provide clarity and transparency on the meaning of tips, gratuities and service charges. It will also give customers clear information on where their tips and service charges go. Many customers believe service charges are tips. This is certainly not always the case.

The Bill has a number of main aims. It will prohibit employers from using tips and gratuities to make up contractual rates of pay. An employer cannot make a deduction from a person’s wage regarding tips. The policy intent is to ensure tips and gratuities are additional to the wages in all circumstances. The Bill will provide a legal entitlement for workers to receive tips and gratuities paid in electronic form, that is by debit or credit card or other electronic means such as apps, with a provision that these tips and gratuities should be paid out to workers in a fair and transparent manner.The employer must provide a statement to workers showing the amount of tips obtained in a period and the portion paid to the individual employee for that particular period. An employer may not retain any share of tips received electronically, unless such retention is required by this Act, for example, to pay tax or bank charges arising from providing electronic modes of tipping, or only where he or she regularly performs to a substantial degree the same work performed by some or all the employees, such an amount that is fair and reasonable in the circumstances. The Bill will also require businesses to clearly display their policy on how tips, gratuities and mandatory service charges are distributed. The customer will be better informed about how tips are treated. The Bill also provides for similar provisions for new models of work such as platform workers who are not employees but their work typically attracts tips, for example, food takeaway delivery apps.

While employers will be required to include detail on how cash tips are dealt with when displaying their policy towards tips and gratuities there will be no other regulation of cash tips as this is, according to the WRC, not workable. Cash tips are not accountable and are not under the control of the employer. They are controlled by the staff and to bring them under the control of the employer or legislation such as this could have unwelcome consequences for workers in terms of income tax and social welfare as receipt of them would no longer be a matter of self-declaration.

Payment of tips and gratuities by electronic means, in contrast to cash tips paid directly to the worker go through employers’ books and the employer is in control of how these tips and gratuities are distributed. The electronic record generated by this payment method will facilitate inspections by the WRC.

With an ever-increasing number of ways of tipping using cashless and contactless apps such as Strikepay and TiPJAR, the payment of tips by electronic means may well become the predominant way of tipping staff into the future. It should be noted that tipping apps can be utilised to ensure electronically paid tips go to staff directly and not through the employer.

There will be no interference with schemes where tips are managed by employees themselves, for example, under a tronc system. These can continue to operate as they currently do. A tronc scheme is a common fund into which tips and gratuities are paid to be divided out among staff according to a certain formula. The employer has no role in determining the allocation of tips. Troncs are common in hospitality, gambling and leisure sectors. The operation of these schemes is not affected by this Bill.

There will also be no change in the tax treatment of tips and gratuities. At the moment service charges are a grey area. Many customers believe that a service charge is a tip. This is not the case, at least not in law. The Bill will maintain the position that mandatory service charges levied by a business, as distinct from voluntary and discretionary tips and gratuities, form part of business revenues. I have asked my officials to consider an amendment that would prohibit the use of mandatory service charges to make up wages and to require that they go to staff as income. Discretionary service charges, however, will fall within the Bill’s definition of "tips and gratuities" and the Bill will apply to these types of voluntary customer payments. Our understanding is that a portion of mandatory service charges often go towards tips. For example, a hotel may have an arrangement where it has been agreed with staff that out of all 12% mandatory service charge, 3% goes to the staff as tips. By requiring businesses to display their tips and service charge policies, this will ensure transparency.

Regarding redress, an officer of the WRC when adjudicating on a complaint may take into account certain factors when determining whether tips were distributed fairly, including the seniority or experience of an employee, the value of sales generated by him or her and the number of hours worked. All employees must be consulted on the policy that is introduced.

I am conscious of cost concerns for businesses when introducing any new laws, particularly small and medium enterprises and those along the Border competing with businesses in Northern Ireland where workers' rights are different, often weaker and wages and costs lower. There may be a minor cost burden to industry with employers having to prominently display a statutory notice on the employer’s tips and gratuities and mandatory service charges policy. However, information will be provided by my Department and the WRC in the form of templates for policies on tips 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. These templates will be promoted and circulated widely to assist with compliance and help minimise the burden on micro and small enterprises. The requirement for employers to provide a statement to workers when a payment is being made will also impose a burden. However, as this requirement applies only to electronic tips, the existing electronic records will aid in the efficiency of producing the statement and minimise the administrative burden involved.

I will now provide a brief explanation of the various sections of the Bill. Section 1 provides for definitions used within the Act.

Section 2 inserts new definitions for "tips", "gratuities" and "mandatory service charges" in the Payment of Wages Act 1991.

Section 3 inserts four new sections, 4A to 4D, in the Payment of Wages Act 1991. The new section 4A will enable me, as Minister, to make regulations to prescribe the employers or class of employers to which the new sections 4B to 4D of the Payment of Wages Act 1991 will apply. It will also enable me, as Minister, to prescribe by regulation an employer or a class of employers, to which sections 4B to 4D do not apply. Under the next section 4B,employers will be required to distribute fairly and in a transparent manner tips that are received in electronic form through debit or credit cards, other smart-type payment cards or payment apps, as the case may be. Employers will not be allowed to retain any share of tips or gratuities received by an employer electronically unless such retention is required or permitted by this Act. Only where the employer regularly performs to a substantial degree the same work as is performed by some or all of the employees will the employer be allowed to retain an amount that is fair and reasonable in the circumstances - in other words, a share that is proportionate to the amount of work that he or she, as employer, performs.

In considering a complaint on whether a distribution of tips and gratuities to an employee is fair, an adjudication officer of the WRC might have regard to all the factors or circumstances that he or she considers relevant. Section 4B also requires an employer to provide a statement to workers showing the amount of tips, including discretionary service charges, obtained in a period and the portion paid to individual employees for that particular period. This will further ensure transparency in the amount of tips shared. An employer before establishing or making a material change to his or her policy on the distribution of tips or gratuities or the treatment of mandatory service charges will be required to consult with those employees.

A new section 4Cwill prohibit an employer from making a deduction from an employee’s wages in respect of tips or gratuities made to, or left for, an employee, or make a deduction from an employee’s tips or other gratuities other than as required under statute or by any instrument made under statute, or to the extent required to meet costs directly arising from providing electronic modes of payment for tips. A new section 4D requires the employer to display a tips and gratuities notice stating whether tips or gratuities are distributed to and among employees, the manner in which they are distributed and the amounts so distributed, and also whether services charges, or any portion of them, are distributed to and among employees and, if so, the manner in which they are distributed and the amounts so distributed. Section 4D also allows me, as Minister, to make regulations regarding the information that must be contained in a tips and gratuities notice and the way or particular locations at which a tips and gratuities notice must be displayed. This includes a website or other online digital platform hosted by the employer or at the place of business at which employees perform their work or service.

A new section 4E requires prescribed persons to display a contract workers tips and gratuities notice stating whether tips or gratuities are distributed to and among contract workers, the manner in which they are distributed and the amounts so distributed, and whether services charges, or any portion of them, are distributed to and among contract workers and, if so, the manner in which they are distributed and the amounts so distributed. For example, this would cover businesses that contract with platform workers who are not direct employees but whose work typically attracts tips and gratuities. Section 4E also allows me, as Minister, to make regulations regarding the information that must be contained in a contract workers tips and gratuities notice and the way or particular locations at which a tips and gratuities notice must be displayed. For the purposes of section 4E, "contract worker" is defined as a natural person who carries out work other than as an employee, including on a contract for service, for a person to whom this section applies.

Section 4 provides for an amendment to section 6 of the Payment of Wages Act 1991 that will provide for an adjudication officer of the WRC to direct an employer to repay any unlawful deduction of tips or gratuities arising from a complaint.

Section 5 provides for an amendment to section 3 of the Terms of Employment (Information) Act 1994. This means that a statement regarding the employer’s policy on the way tips or gratuities and mandatory service charges are treated will become part of the core terms that a new employee is to be furnished with within five days of commencing employment.

Sections 6, 7 and 8 deal with enforcement and compliance issues and provide for the relevant amendments to be made to the Workplace Relations Act of 2015. This enables and authorises the WRC to carry out inspections and to take complaints regarding compliance with the new requirements set out in this Act.

Section 9 relates to the Short Title, commencement, and collective citation of the Act.

Most employers do their best to ensure tips are distributed fairly among their staff.The aim of this Bill is to make sure that is the case across the board, giving employees a new legal right that currently does not exist.

Most customers are unsure where their tips go and of the difference between a tip and a service charge. From now on, establishments will be required to show clearly how everything is distributed and where it goes. This goes for whether the customer pays by cash or card. An important requirement of the new Bill is that an employer must provide a statement to workers showing the value of electronic tips obtained in a period and the portion paid to the individual employee for that period. This will ensure transparency for workers.

This Bill provides for one of five new workers' rights that the Government is introducing this year. We are determined to make better working conditions a legacy of the pandemic and the Government. I firmly believe this is necessary if we are to recruit and retain the staff we will need to drive our enterprise economy forward. We will, of course, be sensitive to issues such as cost and competitiveness and the needs of small businesses.

The Bill will improve the rights and entitlements of workers, particularly lower-paid workers, in addition to providing transparency for customers.

I commend the Bill to the House. I look forward to hearing Members' contributions.