It may be hard to believe, but currently employers in Ireland are not obliged under law to pass on any tips received from customers to their staff.

This means that workers have no protection if their employer decides to keep some, or all of the tips.

But a new law aims to change that.

The Payment of Wages Bill has four main objectives.

Firstly, it will ban businesses from using tips and gratuities to make up the basic pay of their staff.

This will ensure that tips and gratuities are paid in addition to their wages.

Secondly, the bill will provide a legal entitlement for workers to receive tips and gratuities paid in electronic form.

It states that these tips and gratuities should be paid to workers in a "fair and transparent" manner.

The same will not apply to cash tips - for a number of reasons we'll get to later.

Thirdly, an employer will not be able to keep any of the tips received electronically, except under certain conditions set out in the act.

For example, if the employer regularly performs the same work as some of the employees.

Finally, the bill will require businesses to clearly display their policy on how tips, gratuities and mandatory service charges are distributed.

This is to make sure both staff and customers know where tips are actually going.

The tourism, hospitality, hair and beauty, taxi and delivery services are the main sectors to which the new law will apply.

However, legally it will apply in all settings.

The new law has been widely welcomed– but some elements are causing concern for industry bodies.

What is a 'service charge'?

There has always been confusion over so-called ‘service charges’.

Despite what many believe, a service charge is not the same as a tip.

This mandatory charge forms part of business revenue, which means it can be used to cover any costs, including paying staff wages.

But earlier this month the Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar, said he is looking at including a provision in the bill which would change this.

"I have asked my officials to consider an amendment that would prohibit the use of mandatory service charges to make-up wages and to require that they go to staff as income," he said.

This has caused concern for the Irish Hotels Federation.

"This business revenue stream can be applied to meet all business costs including salaries and should remain as such," the IHF said in a statement.

The Restaurants Association of Ireland has said it would welcome the opinion of the Attorney General on the issue.

"Currently service charges are provided for as part of contracts for goods and services and this may have wider implications for many sectors within the country regarding competition and contract law," a spokesperson for the RAI said.

When asked what service charges go towards in the restaurant industry, the RAI said that as a trade representative body it is restricted by competition law from discussing a business’ use of income - which is currently what a service charge is.

"As with many other sectors, including but not limited to airlines, utility providers, and food delivery companies, service charges are charged to customers as part of goods and services," the RAI spokesperson said.

However, this new legislation will mean that employers must ‘clearly display’ their policy on how services charges are distributed - something the RAI said it welcomes.

But not all businesses choose to apply service charges - and some believe the mandatory charge discourages customers from leaving tips.

One such business is the Scholars Townhouse Hotel in Drogheda, Co Louth.

Managing Director Mark McGowan, who is also President of the RAI, said he believes service charges have a negative impact on gratuities.

"I have discussed it with directors many times before.

"With the rising cost of doing business, it is a possibility that we would be forced to implement such a measure but it is not on our agenda at present," he said.

He said some businesses have been forced to apply a service charge as a survival mechanism.

Overall, Mr McGowan said he believes this new legislation will have a positive impact on the hospitality industry going forward.

"I welcome the new bill, it is about protecting employees, ensuring the gratuity goes where the customer intends - and that is to the staff," he said.

"We want to be in a position to attract people to work in the sector and make it more attractive to potential employees that want to make a career in hospitality," he added.

What about cash tips?

The Government has been advised by the Low Pay Commission and the Workplace Relations Commission (WRC) that heavy regulation in this area is not necessary - and could even backfire by undermining some informal arrangements that are working well from the point of view of workers.

The Tánaiste said they have also been strongly advised that trying to regulate cash tips too tightly would be unenforceable, especially where cash tips are controlled by staff and not the employer.

While employers will be required to include detail on how cash tips are dealt with when displaying their policy towards tips and gratuities, there will be no other regulation of cash tips.

Cash tipping is still commonplace in a number of sectors, including the personal grooming industry.

Margaret O’Rourke Doherty, CEO of the Hair And Beauty Industry Confederation (HABIC), said the distribution of tips is not normally an area of contention.

"Normally the consumer will leave a cash tip, given directly to the person or people who provided the service," Ms O’Rourke Doherty said.

"When a tip is left electronically via the salon, the client is always very clear on who the tip is for, historically this is honoured by the employers," she added.

However, the HABIC has welcomed the increased transparency the new law will bring for both staff and customers.

How will the new law be enforced?

In terms of enforcement, the Workplace Relations Commission (WRC) will carry out inspections and take complaints regarding compliance with the new requirements.

In order to do this, the bill states that amendments will need to be made to the Workplace Relations Act of 2015.

The bill also provides for an amendment to the Payment of Wages Act 1991, that will provide for an adjudication officer of the WRC to direct an employer to repay any unlawful deduction of tips or gratuities, arising from a complaint being made to the WRC.

A tipping point

Perhaps the most important part of this new legislation is that staff and customers will have full transparency on where tips, gratuities and service charges go.

The Government has said it will provide businesses with templates to help employers identify the types of information and procedures that should be outlined and displayed in their tips policy.

It said this should help to assist with compliance and minimise the burden on micro and small businesses.

Employers will also have to provide a statement to workers showing the amount of electronic tips obtained in a period - and the portion paid to the individual employee for that timeframe.

Many will be hoping the introduction of this new legislation will be a tipping point - and will bring about positive changes for businesses, customers and mostly importantly lower paid staff who rely on tips to make a living.