2024 Nevada Restaurant Tip Pooling Laws | TipMetric

Nevada has a significant hospitality industry. With gaming, tourism, energy and ranching industries prevalent throughout the state, hospitality — and more specifically the service industry — employees a large number of people. Many employees within the service industry who earn tips should be aware of how their tips are handled in relation to employee and state rules.

Typically, service staff have a basic understanding of tipping at restaurants, hotels and other places of hospitality. What may not be as well-known are the rules that determine how tips should be handled by those establishments employing service staff. Employees in Nevada can visit the Nevada Office of the Labor Commissioner website for more information.

The Fundamentals About Tips

Federal law and state of Nevada law have indicated that restaurant tips belong to the employee rather than the employer. As a result, employers can’t ask staff to hand over tips. With that in mind, there are exceptions if certain criteria are met.

· A tip credit can be taken, meaning that state law allows the employer to count some of all of the employee’s tops as part of its obligation towards minimum wage.

· A valid tip pool exists, and under federal law and most state laws, employees are required to pay part of their tips into a pool that is then shared among other employees within the establishment.

Tip Credits Explained

The federal minimum wage is currently $7.25 and the Nevada minimum wage is $9.00 per hour. Tipped employees are entitled to the full minimum wage and employers in Nevada may not take a tip credit. Whatever the employee makes in tips, the employer is still obligated to pay the state’s minimum wage amount.

Tip Pooling Explained

In Nevada, employers may require tip sharing, or tip pooling. Tip pooling involves the combining of tips earned by customer-facing staff and a percentage of that pool being shared with staff that assist those staff members who serve. Customer-facing employees receiving tips may be required to pool what is reasonable and are able to ensure that whatever amount they keep successfully meets the requirements for minimum wage.

To help employers who incorporate tip pooling in their establishments, automated tip pooling software is available to make it easier for owners, manager and service staff to accurately account for tip management and payroll processing.

Mandatory Service Charges

On occasion, a mandatory service charge is added to a customer’s bill to accommodate for things such as private parties, larger tables and other situations that require more staff attention. Many restaurants incorporate these practices, viewing it is an understood contract between the restaurant and the customer and not a direct result or indication of exceptional service delivered by the wait staff. In the state of Nevada, this added charge is not a tip and it is preferred that the restaurant make the customer aware it in writing, verbally or otherwise. The customer should also be made aware of the fact that service charge is shared among the service staff, if that is what does take place.

As an incentive for establishments to no longer implement mandatory service charges if some or all portions of it are shared with the staff, the IRS created rule regarding this practice. If any part of the service charge is shared among staff, that amount must be considered as part of the wait staff’s wages rather than a tip. In addition, Social Security and Medicare withholding must be incorporated on the amount shared among staff. Furthermore, an amount provided by the customer that is more than the standard cost of food and taxes must be viewed as voluntary if it is to be categorized properly as a tip given to the staff.

Credit Card Fees

Customers often pay by credit card when dining out. In cases where an employer is charged a processing fee when accepting a credit card, and the customer pays a tip using that credit card, the employer may or may not deduct the employee’s share of the processing fee in Nevada. While this rule varies from state to state, Nevada does not specifically address it.

Responsibility of the Employer

Labor rules, laws and guidelines in the state of Nevada should be understood by persons employed by the hospitality industry. An understanding of such information helps employees know the impact on their income. Utilizing automated tip distribution software for restaurants will also go a long way in helping employers and their employees more accurately manage tips and income.