Tips paid by card are taxed, and a lot of people aren't aware of that.
That's according to Damien McCarthy, CEO and co-founder of HR Buddy.
He says legislation around tips and gratuity payments needs to take account of Ireland's move towards a cashless society.
He told The Pat Kenny Show this is becoming an issue.
"Tips and gratuities are now a big issue in the service industry.
"We're talking about workers in the beauty industry, hospitality sector, maybe taxi drivers, delivery drivers and so on - where there might be a tipping culture.
"They're being impacted now by a cashless society."
A person using a payment terminal at a coffee shop in January 2019. Picture by: Jacob Lund / Alamy Stock PhotoDamien says tips from customers on cards are not treated the same as cash.
"Very many customers actually mightn't be aware that when they're paying a tip or gratuity with their bill to the service provider, that it's going to end up being taxed.
"Someone working full-time in the service sector, they may receive a €10 tip - but that may now be added to the payroll and taxed.
"So the customer's actually providing €5 to the service provider and tipping the taxman €5."
He says legislation needs to deal with this issue, as less and less people carry cash.
"As part of the upcoming legislation, I think it would be a huge help to the service industry if transactional payments through the bank card for tips and gratuities would also be allowed to be non-taxable".
'Indirectly impacting employers'
Damien says it would be in the employers interest to help with this.
"Most employers now across the service industry... are actually looking to be proactive.
"This is a problem that's indirectly actually impacting upon the employers as well.
"If an employee is down tip money because we're now in more of a cashless society, or because the bank card payments are being taxed, where do they go?
"They go back to the employer looking for a wage increase."
A previously-announced law to protect workers tips mean employers have to clearly display their policy on how both card and cash tips and service charges are distributed.
While all electronic tips must be given out "fairly and in a transparent way."
However payment of tips electronically means the employer is in control of how these are distributed.
