As Ireland’s hospitality and service sectors continue to grapple with staffing shortages, Excel Recruitment has called on Government to reconsider the taxation of tips as part of a broader effort to make lower-paid roles more attractive to workers.
The comments come as the Competition and Consumer Protection Commission (CCPC) prepares to publish new research and guidance on tipping practices in Ireland.
According to Shane McLave, Managing Director of Excel Recruitment, tips play a crucial role in supplementing incomes for workers in hospitality, beauty, and other customer-facing service roles.
“For lower-paid workers, tips are hugely valuable. While recent legislation rightly ensures that tips left by customers go directly to staff, the Government missed an opportunity to go one step further by considering whether tips — or a portion of them — should be excluded from the tax net.”
The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022, which came into force in December 2022, introduced new rules to ensure transparency around tipping and made it illegal for tips or service charges to form part of an employee’s basic pay. However, all tips received by staff remain fully taxable.
Excel Recruitment believes that this approach does little to address the ongoing recruitment challenges faced by hospitality and other service sectors.
“These are often low-paid roles, yet they are essential to our local and national economy,” McLave said. “Allowing workers to earn a certain amount of tips tax-free could make a real difference in encouraging people back into the sector.”
He pointed to existing tax-free voucher schemes, which allow employers to provide employees with up to €1,500 per year in non-taxable benefits, noting that such initiatives rarely benefit tipped workers.
“A more progressive approach would be to introduce a similar threshold for tips in service industries, allowing workers to earn up to a certain amount without incurring a tax bill. This would directly support incomes in sectors such as hospitality and beauty.”
McLave also noted that, from a consumer perspective, tax has already been paid on the goods or services being purchased.
“Once a product or service has been paid for, the appropriate tax has already been applied. Tips are a discretionary reward for service, not part of the original transaction.”
For further insight into labour market trends across hospitality, retail and service industries — and how policy changes could support both employers and employees — contact Excel Recruitment on 01 871 7676 or email info@excelrecruitment.com
