The Low Pay Commission has advised the Government against legislating to ensure that low-paid workers receive all tips due to them as it could have unintended consequences, and end up in them receiving even lower take-home pay.

The warning comes in the Commission's "Review of Current Practices in relation to Tips and Gratuities" published this evening.

The Review was commissioned by the Minister for Employment Affairs and Social Protection Regina Doherty after a Private Members Bill - the National Minimum Wage (Protection of Employee Tips) Bill 2017 - was initiated in the Seanad by Senators Paul Gavan, Trevor O’Clochartaigh and Fintan Warfield of Sinn Féin.

The Commission concludes that legislation or regulation should not be introduced in this area, noting that there is no consensus on how the issue should be addressed.

It warns that there could be "unintended negative consequences" such as the reclassification of service charges, leading to a potential reduction in the take-home pay of low-paid employees.

It highlights in particular the potential tax implications of formalising arrangements for tips, which would then be open to taxation and Revenue Inspection.

It states: "While the Commission is aware that employees are currently required to declare cash tips for revenue purposes, its view is that legislators have to be practical in this regard and acknowledge that there is likely to be a high level of underreporting when it comes to cash sums left for employees by customers. Formalising such an arrangement could end up reducing the take home pay for many low wage employees when taxation is taken into account."

It also says that the administrative and compliance costs including the keeping of records would not be justified.

The Review notes that the Workplace Relations Commission had submitted that from both an adjudication and enforcement point of view, legislation in this area could be unworkable. 

The Commission notes that tipping practices are not restricted to the hospitality sector - and that legislation primarily geared to that sector may not be appropriate for other occupations. It states: "...a one size fits all approach when it comes to legislation is not to be recommended".

The Commission's Review accepts that not legislating in any form for tipping would leave employees in a position where employers could take ownership of some or all of the tips left for them by customers - and acknowledges there have been enough reported cases to suggest this is an issue for some employees.

It calls for establishments where the benefits of tips do not go fully to employees - and whether service charges are treated differently from tips and gratuities - to disclose the fact to consumers.

Low Pay Commission Chairman Dr Donal de Buitleir said that overall, they considered that there was insufficient reliable data to conclude that the issue of employers withholding tips was a significant problem in Ireland.

He also voiced "quite significant" concerns as to the enforceability of the legislation on matters which are not statutory rights, given the "informal" nature of tips and gratuities.

He noted that if legislation was introduced, a "largely informal and flexible" practice would have to be formalised, and paper records would have to be maintained - as without them, adjudicators on complaints would have no evidence on which to base a ruling.

Minister Regina Doherty said it was clear this was an incredibly complex area with no easy answers.

She said the report should frame the debate on the issue, adding that she was reviewing all options for solutions.