Alaska Tip pooling and Tip credit Laws | TipMetric 2020
Service industry employees in Alaska who earn tips should know about how their tips are handled, what their rites are and what the state law instructs.
While we can assume that virtually all wait staff understand what a tip is, what may not be known are the laws and rules that dictate how tips should be handled and treated by establishments employing wait staff.
Tip Credits
Alaska is one of the states in the U.S. that does not allow a tip credit. The current minimum wage for the state is $9.89 per hour, a bit above the federal minimum wage. Employers are required to pay the full state minimum wage to employees, no matter how much that employee earns in tips.
Tip Pooling
Alaska does allow employers to require tip sharing and tip pooling and that pool is shared among staff that assist in serving customers as part of their regular job duties. Employees receiving a restaurant tip are only required to contribute what is reasonable and may also ensure that whatever they do keep meets the minimum wage requirements. There are certain guidelines Alaska employers must follow if allowing tip pooling. Details of what is and isn’t allowed can be found on the Alaska Department of Labor and Workforce Development website.
Employees who share in the tip pooling must be part of “chain of service” where their actions may result in a tip from a customer. This could include wait staff, bartenders, hosts and buss staff. Not included in this group are dishwashers, cooks and cashiers.
Tip pooling software is available to help ensure mistakes and disputes are eliminated, making it easier for establishments to save time processing payroll with accuracy.
Mandatory Service Charges
A mandatory service charge is sometimes added to a customer’s bill if warranted, for things such as larger tables, private parties or similar circumstances. This is viewed as part of the contract between the customer and the restaurant and not an indication of good service by the wait staff. In Alaska, this additional charge is not a tip and there is no requirement that any of it must be shared with employees.
The Internal Revenue Service, in 2014, created an incentive for establishments to no longer charge mandatory service charges if any portion of it is shared with the staff. If part of the service charge is shared with staff, then it must be categorized as wages instead of tips, and, as a result, must have Social Security and Medicare withheld on these amounts. Any amount given by the customer above the normal cost of food and taxes must be voluntary if it is to be properly categorized as a tip to the service staff.
Credit Card Charges
If an employer pays a processing fee to accept credit cards from customers, and that customer leaves a tip as part of the credit card payment, the employer can deduct the employee’s share of that credit card processing charge the employee realizes in Alaska. If the processing fee for using a credit card is 3%, then the employer may deduct 3% from that employee’s tip.