Changes to the Payment of Wages Legislation in relation to Tips and Gratuities

21 November, 2022

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 (the “Act”) will come into effect from 1st December 2022. This will see employees given greater legal rights and certainty over the payment of tips and gratuities. Employers have been given the intervening time to prepare themselves and their businesses for the change in the legislation and to adjust work practices to ensure compliance. The Act will make it illegal for employers to use tips, gratuities or service charges to make up employees’ wages.

The Act will mean that any charge, or so called “service charge” imposed by a business must be distributed fairly and equally amongst staff and cannot be retained by the employer. The Act also provides obligations on employers to inform the public as to how they treat tips and gratuities within their business. The Act builds upon and strengthens the protections already afforded to employees under the Payment of Wages Act 1991, The Terms of Employment Information Act 1994 and the Workplace Relations Act 2015. Leo Varadkar (Minister for Enterprise and Trade) has said,

“Tips can form a significant percentage of a worker’s take-home pay and these changes go a long way to ensuring those tips are distributed to the people who have earned them.”

The Act will provide clarity on the meaning of tips, gratuities, and services charges, to place tips and gratuities outside the scope of a person’s contractual wages and oblige employers to display prominently their policy on the distribution of tips, gratuities and service charges. The Act calls for employers to ‘treat all payments, whether made by electronic mode of payment or other means received from customers as a tip or gratuity’. The employer will be given some discretion on how to distribute electronic tips including:

  • seniority or experience of the staff;
  • the value of sales or revenue generated by the individuals;
  • the number of hours worked;
  • whether the worker is full time or part time; and
  • the worker’s role in service delivery.

The Employer must give employee’s a statement of the tips and gratuities distributed included the total amount of electronic tips received during a nominated period. This statement must be given within 10 days of the tips and gratuities being distributed. The Act states that all electronic tips must be distributed fairly and transparently. Compliance with the Act will be inspected through the Workplace Relations Commissions who have powers to order employers to reimburse any unlawful tip or gratuity deduction.

The Act specially prohibits certain deductions. Section 4C (A) states that an employer shall not make a deduction from an employee’s wages in respect of tips or gratuities made to or left for an employee.

The Act puts an onus on Employers to display a notice referred to as a ‘tips and gratuities notice’ stating:

  • whether or not tips or gratuities are distributed to and amongst employees;
  • where tips and gratuities are so distributed, to and amongst employees, the manner in which they are distributed and the amounts so distributed; and
  • whether mandatory charges, or any potion of them are distributed to and amongst employees and if so, the manner in which they are distributed and the amounts so distributed.

The Act is due to be reviewed by the Minister for Enterprise, Trade and Employment after one year. This will allow the Minister to assess the effectiveness of the new legislation and make any redresses if required.

We would encourage all employers, to whom the Act will apply to put a policy in place as soon as possible and ensure that records of all tips and gratuities are maintained for inspection purposes. 

For more information please contact:

Claire McDermott, Partner at email:, John McGrath – at email:  or any member of the FOD Employment Team.

This article is current as at 18th November 2022 and is provided for information only and does not constitute legal advice.

About the Authors

Claire McDermott, Partner

John McGrath, Employment Solicitor

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