The Payment of Wages Act came into effect this week, meaning all tips including service charges will go to staff and can’t be put towards making up basic wages.

The change raises a lot of questions around pay, equality and rewards, but does it mean we are moving towards a more American-style service industry?

Jean McCabe, Deputy Chairperson of Retail Excellence and Jim Elliott, Irish-American comedian, joined The Anton Savage Show to discuss how the new legislation might change how we tip.

American tipping culture

Jim Elliot is from the United States, where the tipping culture is vastly different as service industry employees rely on tips more than the "insultingly low" wages.

"The concept is that you will be paid via tips", he explained.

The popularity of tipping in America is "certainly part of" the reason customer service is so good there.

"The fact that you know that your wages depend on just how much you pander to your customer at the time, you're going to slap a bit more of a smile on."

He said that it's unclear whether it was low wages or high tips that came first.

Another listener said that he found the American tipping culture "almost aggressive".

"At least here in Ireland, waiting staff seem genuinely delighted to get tipped", they said.

"Only fair"

Jean McCabe believes that the legislation is "only fair".

"Tipping should be seen as a reward for employees and I think it'll help the industry also which is struggling with retention", she said.

"It should be tax-free. It should be seen as a little reward on top."

However, she said she'd like to think tipping isn't ubiquitous in the restaurant industry here as it is in the US.

One listener who works in a bar in Dublin texted in saying: "My manager doesn't want us to get tips now because he doesn't want to have to deal with the taxation implications because he'll have to process it."

Service charge

The new law also provides for service charges, "or anything that would lead a customer to believe it is a charge for service", which is to be paid to staff as well.

Ms McCabe said that having an automatic service charge that people have to choose to opt-out of is "a little bit presumptuous".

"I think tipping should be a reward for good service", she said.

"But then again, it's not that culturally embedded in Ireland either."

"It's very subjective."

Listen back to the full conversation here.