I oppose this Bill, as I did last week in the Seanad. I do so not because the Government does not want to help low-paid workers - our record in that regard speaks for itself - not because there is nothing good in the Bill, because there is a lot in it that is good, and not for political reasons, even though that is what has been alluded to by Sinn Féin. My record in the past three years as a member of the Government shows that I will work with anybody who is willing to try to achieve additional protections for workers. I am opposing this Bill because it is fundamentally flawed. This is not only my view, as Minister with responsibility for the working rights of people, but the view of the independent Low Pay Commission, by which I am guided on this matter.
The Government did not oppose this Bill in its early Stages of its passage through the Seanad because I had asked the Low Pay Commission to examine tipping practices and to report back to all of us with its findings. When those findings were examined closely, it became clear that this Bill had taken the wrong direction and it could not be fixed by a few amendments. A different approach was needed and I am taking a different approach, one that I believe will be workable and, probably more important, enforceable.
Who is the Low Pay Commission? The commission is an independent body representing a wide range of interests and perspectives. In conducting its examination of tipping practices, the commission engaged in a targeted consultation with political parties, trade unions, employer and employee representative groups, experts in employment law and State bodies such as the Revenue Commissioners and the Workplace Relations Commission, WRC. It also examined current tipping practices in other jurisdictions similar to Ireland. What were the findings of the Low Pay Commission? It found, as set out in its 2018 report, that legislation or regulation should not be introduced in this area as it could be unworkable and unenforceable. It also found that there could be unintended negative consequences for low-paid workers such as the reclassification of service charges, which would lead to a potential reduction in their take-home pay. The commission also stated that because tips are paid in a variety of different sectors and contexts, the one-size-fits-all approach set out in the Private Members' Bill should not be recommended.
I want to note some specific points that were made in the submissions made to the commission during its examination. The Revenue Commissioners noted that if tips are issued through the employer, PAYE, universal social charge and PRSI, including employer PRSI, must be applied. This is what I mean when I say the Bill has tax implications. These are not my words. They are the words of the Revenue Commissioners. In Ontario, Canada, the Protecting Employees Tips Act 2015 contains a number of similar provisions to this Bill. There is currently to my knowledge no study regarding the effectiveness of this Canadian provincial legislation, but there is at least some anecdotal evidence to suggest that employees' take-home pay was reduced as a result of that legislation. This is not something I can countenance in this country.
The Green Party argued that it would be very unlikely that the State could provide the level of inspection and enforcement that would be required for this Bill to work. The Workplace Relations Commission, which if this Bill is passed would have the role of inspection and enforcement, stated this legislation would be unenforceable. The WRC's adjudication officers rely heavily on paper-based evidence. Tips, by their very nature, do not attract records, receipts and paperwork. In the absence of paper records, an adjudication officer in the WRC would have to consider the credibility of those giving evidence and judge who they considered to be telling the truth. There would be no official paper record, unless a formal system of recording and distributing tips was introduced. This is no easy task. This was a key reason the Low Pay Commission concluded the administrative and compliance costs involved in regulating this area could not be justified. On that point, it was Fianna Fáil that submitted the opinion to the Low Pay Commission that we should not create more bureaucracy in an area that does not warrant it.
The WRC also sees a problem with the Bill's proposed tronc schemes. This is because in the employment rights sphere, claims must be taken by employees against employers. However, when a tronc exists, the responsibility for the collection and distribution of tips shifts away from the employer, and as a troncmaster is not an employer, no claim could be taken against them if they did not distribute the tips fairly. It is in that context, Revenue confirmed, that if a troncmaster is involved in the distribution of tips, they would in fact be required to register as an employer and, therefore, make tax deductions accordingly. Furthermore, the WRC noted that the entirety of section 4 of the Private Members' Bill, which provides for offences, would be impossible to enforce. It said that for section 4 to be viable, the Bill would require an explicit statutory obligation on employers to keep a record for a specified period of all gratuities received and in all forms, cash and non-cash, similar to the record-keeping obligations in other employment law statutes. This is not provided for in this Bill and, if it were, we would be talking about an extraordinary level of bureaucracy and a huge burden.
I want it to be clear that this is not about me finding fault with this Bill. Informed and interested parties, including the very body that would be charged with enforcement of this Bill, have found fault with it. The Low Pay Commission, the Workplace Relations Commission, the Revenue Commissioners, Fianna Fáil and the Green Party have pointed to problems around legislating in this manner. There are other problems with this Bill that should not be underestimated. For example, it proposes to amend one section of the National Minimum Wage Act 2000 in a way that fails to distinguish between tips and service charges, despite the fact that another part of the National Minimum Wage Act 2000 makes an important distinction between them when calculating a person’s minimum wage. That brings a contradiction into this Bill that would make it unworkable.
The Bill also provides the Minister with regulation-making powers relating to the introduction of tronc schemes, but it is unclear from the Bill who should operate these schemes and how they should operate. There is no detail, policies or principles set out. The Bill provides that there should be employee involvement in the tronc schemes but it does not say whether employers should also be involved or which of them should be in control of the tronc schemes. It further provides that a collective agreement on tips should prevail over any provision of the Bill that conflicts with it, but it fails to set any parameters around what is meant by this, what is envisaged by it and who might be a party to it. Many of the workers in this sector do not have trade union representation. There are implications, too, for low-paid workers, some of whom benefit from certain social welfare means-tested schemes, if tips are pooled into tronc schemes and distributed that way.
My departmental officials and I have met, together and separately, industry stakeholders such as the restaurants, vintners and hotels associations, as well as representative groups such as ONE Galway. We have listened carefully to concerns expressed by hospitality workers, university students, secondary students, trade unionists and commentators. It will take a consensus to solve this problem, a consensus that the commission found to be absent in this legislation. I was glad to learn that some of the key stakeholders are amenable to reaching a voluntary agreement on tipping as an alternative to heavy regulation. I have not minced my words with any of these groups around the need to move on this issue. I am seeking to regulate only to the extent necessary to make progress for the workers concerned and to avoid the pitfalls the Low Pay Commission has warned about that would act against the interests of those workers. I want to take a balanced, considered approach.
It is important to note that none of the proposals put forward will be a silver bullet for workers in this sector who have described to me their struggles in terms of paying rent, education fees, car insurance, utility bills etc. There are broader issues at play. As Minister for Employment Affairs and Social Protection, I can build on the advances I have made with the Employment (Miscellaneous Provisions) Act to help low-paid workers and workers in precarious employment. I intend to amend the Payment of Wages Act 1991 to ensure tips and gratuities cannot be used to make up or satisfy a person's contractual wages and to provide for a requirement on employers to display clearly, for the benefit of workers and customers, their policy on how tips, gratuities and service charges are distributed. In confining the scope of the new legislation in this way, we will support workers and avoid the downsides the Low Pay Commission states are in this legislation.
It is about doing what is possible and that is on what we are basing our measures. The transparency we have can be very strong and can have an important impact. As Members described here earlier, many people who leave a tip automatically assume that it goes to the workers. We have to make sure that it goes to workers. We will bring clarity to what we mean by tips, gratuities and service charges.
I wish to notify the House that while there are the best of intentions in this Bill, there are far too many unintended consequences that would reduce the take-home pay of the people working in this sector. I will oppose it. I wish the House to note that in accordance with Dáil Standing Orders 178 and 179, I have asked that a money message be required with regard to this Private Members' Bill. The Bill, if enacted, would cause significant additional expenditure to be incurred by the Workplace Relations Commission. There are more than 10,000 establishments nationwide in the hospitality sector that would fall within the scope of this Bill. If the WRC was to fulfil its inspection and compliance obligations for even a portion of those 10,000 businesses, there would be a significant additional burden on that State-funded body. This Bill would create new offences. The costs associated with the prosecution of these criminal offences would give rise to an appropriation of public moneys and this necessitates a money message in this case. It would be remiss of me not to raise this issue in the House. It would be dishonest.