2024 Utah Restaurant Tip Reporting Laws | TipMetric

Utah has a significant hospitality industry. With recreation, sports, ranching and tourism 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 Utah can visit the Utah Labor Commission website for more information.

The Fundamentals About Tips

Federal law and state of Utah 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. The Utah minimum wage is the same at $7.25. Employers are allowed to take a tip credit of up to $5.12 in Utah for employees that make more than $30 per month and, therefore, can pay tipped employees a minimum wage of $2.13. If this minimum wage, when added to the employee’s tips, does not add up to the state’s minimum wage, the employer must make up the difference.

Tip Pooling Explained

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. In Utah, employers can require tip pooling. With that in mind, a tip pool required by an employer in Utah is allowed. Customer-facing employees typically receiving tips may be asked 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 sharing 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 Utah, 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, in 2014, 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 choose to deduct the employee’s share of the processing fee in Utah. While this rule varies from state to state, Utah regulations do allow employers to incorporate this practice.

Responsibility of the Employer

Labor rules, laws and guidelines in the state of Utah 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 pool software will also go a long way in helping employers and their employees more accurately manage tips and income.