Tips are wages: this money belongs to you

Service page: A claim against an employer for wages, pension and overtime.

Your tips: what does Israeli law say about tips and how they are shared?

Did you receive NIS 200 in cash directly from the customer? In the restaurant sector (restaurants, cafés, bars and pubs), the tip is, according to the case law, part of the employees’ wages from the employer, even when it was handed directly to the employee and did not go through the till. A tip that came by credit card must reach the employees as part of their wages. Not next week, not “when it is convenient”, but with the wages.

Since the tip is a wage, the rules of the Wage Protection Law, 5718-1958 apply to it: holding back credit card tips, deductions from tips to cover “damage” that are not among the deductions permitted in section 25, or not passing on cash tips may all be treated as late payment of wages or an unlawful deduction, with compensation accordingly.

May tips be shared among employees (a tip pool)?

An employer who suddenly decides that “from now on we all share tips”, without the employees’ consent, is making a unilateral change in the terms of employment. This may give the employees a cause of action.

Since the tip is a wage, it must appear on the payslip (section 24 of the Wage Protection Law), and it is worth documenting how much was collected, how it was shared and who received what.

What counts as tip theft?

Not everything employers do is lawful. These practices cross the line:

• Holding back credit card tips: did the tip appear in the transaction report? It must be passed on to the employee.
• Deducting tips to cover breakages, cash register losses or shortages: prohibited. These are the employer’s business risks, not the employee’s.
• Changing a tip pool policy retroactively: without the employees’ consent, it is a change in the terms of employment that requires consent.
• Funding National Insurance and pension from the tips: according to the case law, the employer may not fund its share of the payments to the National Insurance Institute (Bituach Leumi) and to the employee’s pension from the tip money, unless the employee agreed to this in writing and the tip money leaves a balance above the wage the employer undertook to pay. These payments are made on the full wage, including the tips (in the restaurant sector, tips are treated as wages also for the purpose of the minimum wage).

Tips and taxes: the duty to report

Tips are income in every respect, and they must be reported for income tax. In the restaurant sector, tips are, according to the case law, part of the wages from the employer, so the employer pays National Insurance contributions on them and makes pension contributions on them as part of the wages. Hiding tips from tax may harm you: less reported income means fewer social benefits. The tips you received this year will affect the calculation of your pension, your unemployment benefit and your eligibility for other benefits, so report them correctly.

What do you do when an employer holds on to the tips?

First of all, document. Every shift in which you worked and did not receive credit card tips that you are owed. Ask the employer for a breakdown of the tips paid by credit card, and since the tip is a wage, it must appear on the payslip (section 24 of the Wage Protection Law). If the refusal continues, the Labor Court is the place to go. To the claim for the tips you can add a claim for compensation for late payment of wages, subject to its short limitation (prescription) period (section 17A of the Wage Protection Law). See also: a wage claim against an employer.

Checklist: tips that did not reach you

1. Check whether the tips appear on the payslip. The payslip is given no later than the determining day, the ninth day after the date for payment of the wages (sections 1 and 24(c) of the Wage Protection Law).
2. Ask the employer in writing for a breakdown of the credit card tips for each shift, and keep the request and the answer.
3. For each shift, write down the date, the hours, how many tips were collected and how they were shared.
4. Mark the deadlines: compensation for late payment of wages becomes time-barred within one year of the day on which the wage is deemed late, or within 60 days of the day you received the wage, whichever is earlier (section 17A(a) of the Wage Protection Law); a claim for the wage itself becomes time-barred, as a rule, within seven years (section 5(1) of the Prescription Law, 5718-1958). The details: limitation periods for wage and employment claims.
5. A claim is filed with the Regional Labor Court (section 24(a)(1) of the Labor Court Law, 5729-1969). A claim for an amount that does not exceed the amount set in the regulations is heard by way of an expedited proceeding (section 31 of the same Law).