Protection of Gratuities and Tips

Unless required by law or an established pooling arrangement, an employer must not deduct or withhold tips from employees. Employers may not keep gratuities/tips earned by the employee to cover any business costs, such as theft, errors, damage or wages.

A gratuity/tip is:

• a payment made by a customer or through the employer either directly to or for an employee. It is intended to be kept by the employee or shared with other employees.

Employers who have collected tips through payment systems may deduct amounts, including income tax, employment insurance premiums and Canada Pension Plan contributions. Employers are not allowed to deduct more than required by statute, and only if the money is sent to the proper authority (e.g. Canada Revenue Agency).

Participation in Tip Pools

Employers may require employees to provide their tips to a pooling arrangement for redistribution to other employees.

Employers are responsible for ensuring employees know about a pool arrangement by:

• posting it in a clearly visible location in the workplace;
• online on a secure website accessible by employees; or
• any other manner that ensures employees are aware of the arrangement.

The employer must keep records of any pooling arrangement for two years after the arrangement ends. Pooling arrangements would typically detail the participants, contribution, distribution rules and record-keeping.

Employers (a proprietor or a partner), directors and shareholders may share in the pooling arrangement if they regularly perform the same work as employees who share or are given gratuities in the tip pool.

Enforcement

While tips are considered employment income by federal law, they are not wages under The Saskatchewan Employment Act. Therefore, tips are not included when calculating:

• an hourly wage;
• pay instead of notice;
• public holiday pay;
• vacation pay; and
• the employee’s overtime rate.

However, Employment Standards may recover tips taken by the employer in contravention of the legislation in the same way wages are collected, such as a wage assessment. Enforcement may include Employment Standards issuing a wage assessment and filing a judgment with the Court of King’s Bench if an investigation found the employer owes the employee tips.

A good practice for employers is to keep track of tips collected from each employee, including:

• cash collected that was left by a customer for an employee;
• gratuity/tips added to credit card or debit card transactions; and
• service charges for things such as group bookings.

If a tip pool is in place, employers may want to keep track of the amount collected from employees and how the money was redistributed. Records help to clarify the facts in the event of a complaint.

Only an employee whose tips were unlawfully withheld or deducted may be entitled to recover those tips.

Employers can’t require employees to contribute wages to tip pools.