The Tips and Gratuities Act: what Irish pubs, restaurants and hotels must do

Card machines changed tipping. A few years ago most tips were coins in a pint glass behind the bar. Now most arrive on the card terminal and land in the business's bank account, which is exactly why the law changed. The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 came into force on 1 December 2022 and sets out what Irish pubs, restaurants, cafés and hotels must do with tips and service charges. Here's what it requires, how the WRC judges whether your split is fair, and how tips are taxed.

Who the Act covers

The rules apply to employers in named service areas, including:

• selling food or drink (including alcohol) for consumption on the premises: pubs, bars, restaurants, cafés
• selling food or drink by casual trading: markets and food stalls
• overnight accommodation: hotels, guesthouses, hostels, B&Bs and self-catering
• guided tours, gaming and some other services

If you run any kind of licensed premises or sit-down food business in the Republic, assume you're covered.

The core rules

1. Tips can't make up wages

You can't use tips to make up contractual pay, and you can't make a deduction from wages in relation to tips. Separately, tips don't count towards the minimum wage at all. See our minimum wage guide.

2. Electronic tips must be shared fairly

"Electronic" means anything other than cash: debit and credit cards, smart cards, tipping apps and push-notification apps. These must be distributed to employees in a fair and transparent way.

3. The employer keeps no share, with three exceptions

You can't retain any share of electronic tips, except:

• amounts required by law, such as income tax, PRSI and USC deductions
• the direct costs of distribution, such as bank or card charges on the tips
• where the employer regularly performs, to a substantial degree, the same work as some or all of the staff: an amount that's fair having regard to the work they do

The last exception is for an employer who genuinely works alongside the team, not one who looks in on a Friday.

4. Anything called a service charge is treated as a tip

If you add a charge called a "service charge", or anything a customer would believe is a charge for service, it must be distributed to staff as if it were an electronic tip. It's an offence to describe a charge in a way that suggests staff get it if they don't. Citizens Information describes this as meaning a mandatory service charge can only be added to the bill if the money goes to employees. Other mandatory charges, such as a cover charge, table charge or corkage, aren't caught unless you describe them as being for service.

5. Cash tips: only the notice is regulated

There's no other regulation of cash tips. Where staff manage cash tips themselves, for example a staff-run tronc, the distribution rules don't apply. But your displayed notice must still explain how cash tips are dealt with.

The tips notice you must display

Since 1 December 2022, you must clearly display your policy on tips, gratuities and service charges. Citizens Information says the notice must state:

• whether tips are distributed to and among staff
• how they're distributed, and the amounts distributed
• whether any service charge, or part of it, is distributed, how, and the amounts

The WRC's information guide to the Act includes a sample notice. Put it where customers will see it, and keep a dated copy each time you change it. Not displaying the notice can lead to a fixed payment notice of €500.

The tips policy in the 5-day statement

Your tips policy is one of the core terms a new employee must get in writing within five days of starting. See the full list in our guide to the 5-day statement. You must consult staff on the policy and before making any material change to it, though their consent isn't required: it's your decision.

The statement of tips

You must give employees a statement showing the total electronic tips received in a period and the portion paid to them. Citizens Information says staff should get it within 10 days of the tips being distributed. Handing it out with the payslip for the same pay period is a simple way to meet that. Failing to give the statement can lead to a €750 fixed payment notice.

What the WRC looks at when judging "fair"

An employee who thinks the split is unfair can complain to the WRC. The adjudication officer must consider all the relevant circumstances, including:

1. the seniority or experience of the employee
2. the value of sales or revenue they generated
3. the proportion or number of hours they worked in the pay period
4. whether they're full-time or part-time
5. their role and influence in providing service to customers
6. whether they were consulted on the method
7. any formal or informal agreement on how tips are shared

No method is automatically right. An hours-based split is popular in pubs because it's easy to explain and check. Some restaurants weight it by role (more for floor staff, less for back of house, or the reverse). Whatever you choose, write it down, consult on it, and apply it the same way every week.

A worked hours-based split

This is an illustrative example. A restaurant takes €1,240 in card tips in a week, and the card provider's charges on those tips come to €18.60, leaving €1,221.40 to share by hours.

The rate is €1,221.40 ÷ 160 hours = €7.63375 an hour. Each share then goes through payroll with tax deducted (see below). The hard part isn't the maths. It's having accurate hours for everyone in the same pay period. Try your own numbers in the tips and service charge calculator.

How tips are taxed

Revenue's Employers' Guide to PAYE (Tax and Duty Manual Part 42-04-35A, paragraph 3.4.7) is clear on the two main cases:

• Tips and service charges paid to you and then paid out to staff (card tips, service charges, and cash you collect centrally) are pay. Include them in the employee's gross pay for the week or month they're paid out, report them on the payroll submission, and deduct PAYE, USC and PRSI on the whole amount.
• Tips a customer hands directly to an employee aren't pay for PAYE. They're still taxable: the employee must declare them on their annual Income Tax return.

Revenue's "Is your extra income taxable?" page also lists tips received directly from patrons as taxable additional income. Talk to your accountant about how this fits your payroll. This guide isn't tax advice.

Complaints and penalties

• WRC complaints: within 6 months of the breach, extendable by a further 6 months for reasonable cause. Complaints can cover unlawful deductions, unfair distribution or unlawful retention of electronic tips.
• Fixed payment notices (Citizens Information figures): €750 for not giving a tips statement, €750 for not treating a service charge as a tip, €500 for not displaying the tips notice, and €1,500 for not providing terms of employment.
• Inspections: WRC inspectors check tips notices, tips statements and the treatment of service charges.

A tips checklist for your venue

• A written tips policy covering card tips, cash tips and any service charge
• Staff consulted on the policy (keep a note of when and how)
• The policy in every new starter's 5-day statement
• The tips notice displayed where customers can see it
• The same split method applied every pay period
• Hours for every member of staff for the period, from one reliable source
• A tips statement to each employee within 10 days of distribution
• Electronic tips paid through payroll with tax deducted
• No share kept, other than tax, direct costs or a fair owner share where it applies

Where ShiftComplete fits

ShiftComplete doesn't handle tips. What it does keep is the hours record that makes an hours-based split easy to work out. Staff clock in and out on their phone or the shared tablet, you see hours worked against the roster, and you can download a spreadsheet of hours per person for any period. Drop that into your tips calculation and the split matches the hours people actually worked.

It costs €1.99 per active staff member per month, free for 60 days, with no card and no contract.