The Government has announced plans to ensure workers including waiters and waitresses retain tips paid by customers.

The development follows controversy when it emerged some hospitality outlets were holding gratuities instead of paying them to staff.

Today the Minister for Enterprise Leo Varadkar received approval at Cabinet to draft a law which will give new rights to employees which will prevent businesses from using tips and gratuities to "make up" contractual rates of pay.

The legislation will require firms to clearly display their policy on how both card and cash tips, gratuities and services charges are distributed.

Electronic tips must also be distributed fairly, according to the new legislation.

"There is some evidence of some businesses not passing on tip s to workers and very strong evidence that the public are unclear what happens with service charges, whether it goes to staff or not. So, the Low-Pay Commission looked at this and did a report on it," said Tánaiste Leo Varadkar.

"Now that the sector is back open, now that people are paying in electronic form more and more, we think it's an appropriate time to bring in thus legislation. I would hope to have it enacted by the end of this year and have it in law by next year," he added.

"This new law will, for the first time, give workers legal protections over tips. It will mean that any tips received cannot be counted towards an employee's basic pay, they must be counted as additional and separate.

"I know many people are sometimes unsure how or if tips and service charges are distributed when paying for a meal, for example, especially when paying by card or phone.

He added: "Most establishments already treat their employees fairly with regard to tips, so for many it will mean no change other than having to display their policy clearly."

Employers will be required to keep a record of how tips and gratuities are distributed in the event of there being a complaint.

The records will be available for inspection by the Workplace Relations Commission.

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