New laws prohibit service charges on restaurant bills unless they are paid to staff. Employers risk fines of up to €2,500 if they fail to comply with tipping legislation.
Anaist and Minister of Enterprise Leo Varadkar plans to make changes to a new law that effectively bans service charges unless they go directly to employees.
Minister of Enterprise Damien English will table the amendment to the bill payment of wages (tips and gratuities) in the Seanad this afternoon.
It is understood that the change will change the name “mandatory service fee” to “mandatory fee”.
If customers are asked to pay additional fees, employers are required to publicly demonstrate how the allowance will be used.
The new legislation prohibits employers from describing mandatory charges as a service charge, or using similar terms such as a service charge or service-related charge, unless payments to staff are made in the same way as electronic gratuities and gratuities.
The minister will lay down the different categories of employers that fall under the legislation in new regulations.
A government source said the regulations likely apply to employers in the hospitality industry.
Service charges applied to ticket purchases are not expected to be included. The source said consumers generally did not expect these costs to go to the workforce.
The change means any additional costs that don’t go to the workforce must be “explicit,” the source said.
“Our overall aim with the bill is to prevent employers from using tips or gratuities to pay base wages, and to introduce transparency on how tips and service charges are distributed,” Mr Varadkar said.
“Customers really don’t know what the service charges are used for or who they’re going to.
“Voluntary service charges are clearly the same as a tip or a gratuity, but mandatory service charges by definition are not. As things stand, you are expected to pay without any information about where the money is going.
“I am pleased that we have now come up with a solution that effectively prohibits employers from using the term ‘service charge’ or a similar term unless the money goes directly to the workforce.
“Employers should be explicit about any additional charges and where they will go once this new law goes into effect.”
Varadkar previously said he was exploring two options after consulting with the Attorney General. These had to either do away with the mandatory service charge altogether or make it mandatory to go to the staff.
Another important goal of the new legislation is to prevent employers from using tips or gratuities to supplement basic pay.
Last April, Unite union met with government officials to discuss service charges. The union’s hospitality coordinator, Julia Marciniak, who attended the meeting, said Unite believed any lack of clarity about the ultimate destination of service charges “would prevent customers from tipping, thereby increasing employers’ profits at the expense of employees and customers”.
Ms Marciniak, a former waitress at Dublin’s Ivy restaurant, said the way tips were distributed was a major problem for staff. The labor court previously ruled that she had been unfairly fired for union activities.
Unite’s general secretary, Sharon Graham, said hospitality workers lose thousands of euros a year when tips go elsewhere.