When a tip is not a tip

County View

County View
John Healy

One of the major knock-on effects of the pandemic closedown has been the flight away from the hospitality industry by workers and into the retail sector. Restaurants, hotels and pubs are finding it a struggle to entice back the workers who, having tasted better conditions and more-secure wages elsewhere, are in no hurry to go back.
Whether Leo Varadkar’s new Payment of Wages (Amendment) Bill, which aims to regularise the wages of hospitality workers, will change things remains open to question. For many, the horse has bolted well down the road and locking the door now is too little, too late.
For years, hospitality sector workers have had to endure the lowest wage rates in the economy, but that impact was cushioned by customers’ tips, which helped bring wages up to an acceptable norm.
But two things have changed that. One is the move from cash to card payments in hotels and restaurants. Where once a waiter could discreetly pocket the tip left under the plate by a departing diner, the trend now is for payment to be made by contactless card, meaning that even a generous diner, or his attending waiter, cannot be sure that the tip is going to reach the intended recipient.
The other is the recently discovered practice of restaurants adding a service charge to the bill when the number of diners in a party exceeds a certain level. It is a practice that defies explanation, the commercial equivalent of making water flow uphill. While normal business practice is to allow a discount for larger purchases, restaurants have succeeded in turning this logic on its head by adding an additional charge when customers arrive in a group together.
As Minister Varadkar points out, most people are unsure about where a tip goes and the difference between a tip and a service charge. Is it the case, as many allege, that the service charge is regarded by the owner as additional revenue for his own coffers, rather than as a tip, albeit under a different name, that should go to the staff?
The majority of restaurant workers would say that they get nothing from the service charge levied on a customer’s bill, even though the customer might think otherwise. In fact, trade union Unite says that only 40 percent of waiting staff get to keep all their cash tips, while even less get to keep credit-card tips, which, in practice, are handled by the employer.
Under Varadkar’s new bill, tips and gratuities will no longer be treated as part of a worker’s contractual wages. Employers will be required to display their policy on the disbursement of cash and credit-card tips, as well as the controversial service charge, for the benefit of customers as well as employees.
At specific periods, employers will also have to provide a statement to workers showing the amount of electronic tips obtained in a given period, and how it has been distributed to individual employees. There will be a legal obligation on employers to distribute all card and smartphone tips among the staff in a fair manner.

‘Tip theft’ is the disparaging term used within the trade for employers who retain some or all of the tips left by customers. If, as seems likely, it is the main cause of the drain of workers away from hospitality to more secure work environments, then the owners have only themselves to blame.
Whether the new legislation will be enough to turn the tide remains to be seen. But employers who, in the past, were prone to dipping into the tips basket to boost the revenue stream are likely to have a big price to pay.