Does this tip go to you? New law legally requires employers to pass tips to staff | Fieldfisher
Skip to main content

Does this tip go to you? New law legally requires employers to pass tips to staff

Barry Walsh



Amongst the current plethora of employment related legislation, new laws on treatment of tips and service charges will be of keen interest to certain categories of employers and employees.

The new Tips & Gratuities legislation[1] ("the Act") provides that some employers will be required to drastically change the manner in which they deal with tips received from their customers.

The Act has a number of key objectives:
Prohibition on employers using tips to make up minimum pay
The Act generally prohibits prescribed employers from using tips, gratuities and service charges (let's call them "tips") received by an electronic mode of payment to "make up" workers' basic pay entitlements.
The result of the new legislation is that tips will have to be paid to employees and workers who are not employees (called "contract workers") in addition to their basic pay.  
The Act makes clear that the relevant tips will have to be distributed to workers "in a manner that is fair in the circumstances".  
Notably, the Act does not apply to cash tips received from customers.
Service charges to be treated as is tips
Service charges or similar charges imposed on customers by employers to which the legislation applies must be treated as if a tip received by an electronic mode of payment.
The Act outlines some exceptions to the general prohibition discussed above.  
The Act states that an employer may only retain a share of tips received by an electronic mode of payment where the employer:
  • Regularly performs, to a substantial degree, the same work performed by some or all of the employees, and
  • Retains such share that is fair and reasonable in the circumstances having regard to the amount of such work so performed by that employer.
Statement, Notice and Policy
On foot of the imminent changes, prescribed employers will be required to, no later than 10 days from the date on which a distribution of tips is made, provide employees with a statement in writing specifying:
  • The total amount of tips distributed by the employer for the period to which the statement relates, and
  • The amount of tips or gratuities distributed to that employee to whom the statement is provided.
Furthermore, the new legislation will require employers to display a notice outlining certain information such as whether or not tips or gratuities are distributed to employees and the manner in which they are distributed and the amounts so distributed.
Employers will also be required to introduce a policy on the manner in which tips are distributed within the business.  
This new law will obviously only be relevant to some employers, presumably many in hospitality and some in the retail sector. To become effective, the Act requires more detailed Regulations to be published which will prescribe the employers or class of employers to which the legislation relates. Regulations may also contain details on the notice that must be published.
While many will welcome the Act, the underlying Regulations will be important and will hopefully not be unduly delayed.
How will the new law be enforced?
Contract workers and employees will be able to refer a complaint under the proposed legislation to the Workplace Relations Commission ("WRC") for adjudication.
The Act allows an Adjudication Officer to order an employer to repay any unlawful deduction of tips. In considering a complaint, an Adjudication Officer may have regard for the following factors:
  • the seniority or experience of the employee,
  • the value of sales, income or revenue generated for the business by the employee,
  • the proportion or number of hours worked by the employee during the pay period in which the tip was made,
  • whether the employee is full-time or part-time,
  • the role and influence of the employee in providing service to customers,
  • whether the employee was consulted in relation to the manner of distribution, and
  • whether there is an agreement between the employer and the employee providing for the manner in which tips or gratuities are to be distributed.
The WRC will also have authority to carry out inspections of businesses to ensure compliance with the new requirements.
It is intended that the new Act will provide fairness and transparency on the manner in which electronic tips are handled by businesses.
Affected employers should carefully consider any changes that may be required in anticipation of the new law.

Written by Greta Siskauskaite and Barry Walsh

[1] Payment of Wages (Amendment) (Tips and Gratuities) Act 2022

Areas of Expertise