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New law will ban hospitality 'service charges' unless cash is going straight to staff

The new law is to give consumers greater clarity as to where their cash is going.

Image: Shutterstock

THE GOVERNMENT IS expected to bring in new laws which will put a ban on the hospitality industry imposing a service charge unless that money goes straight to the staff. 

Tánaiste Leo Varadkar said the new Bill will prevent employers from using tips or gratuities to make up basic wages and to “introduce transparency about how tips and service charges are distributed”.

Varadkar said that customers are often kept in the dark about where their service charge cash is actually going and that this Bill was a way of giving the consumer greater clarity. 

“Voluntary services charges are clearly the same as a tip or a gratuity but by definition, mandatory service charges are not. As things stand, you’re expected to pay, without any information on where the money goes. I’m happy we’ve been able to come up with a solution now, which will effectively ban employers from using the term ‘service charge’ or any similar term, unless the money goes straight to staff.” Varadkar explained. 

Minister Damien English will introduce this amendment to the Payments of Wages (Amendment) (Tips and Gratuities) Bill 2022 (the ‘Tips Bill’) in the Seanad this afternoon.

The amendments will rename “mandatory service charges” as “mandatory charges”, and
will ban employers from describing a charge applied to customers as a “service charge” unless those payments are treated by the employer in the same way as electronic tips or gratuities.

Any additional charges that are not going to staff, must be explicit, the new law will state. 

Responding to the news, the Restaurants Association of Ireland said the Bill provided much needed transparency for the consumers and employees of all sectors in which tips, gratuities and service charges, and indeed other additional charges are applied.

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Its CEO, Adrian Cummins, said: “As an association, we must now question the proposed amendments to the legislation which seek to prescribe to certain sectors of the economy how they may contract for goods and services and what terms can be used.

“We are seeking a meeting with the Tánaiste to discuss the proposals in terms of how it will be operationalised with restaurants & hospitality businesses.”

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