Pennsylvania Tip pooling and Tip credit Laws | TipMetric Software 2020
For the state of Pennsylvania, service industry employees who earn tips can find more information about Pennsylvania minimum wage, tip rules and standards for overtime pay at the website for the Pennsylvania Bureau of Labor and Industries.
The Fundamentals About Tips
To begin, federal law and state of Pennsylvania law has determined that a restaurant tip belongs to the employee rather than the employer. This means that employers cannot simply ask staff to hand over tips. With that said, there are exceptions if certain criteria are met.
· In some states, 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. In Pennsylvania, employers are allowed to take a tip credit.
· 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. This also applies to Pennsylvania, as employers can require employees to participate in a tip pool.
Tip Credits
Due to the federal minimum wage, employees are owed a minimum wage per hour. At the federal level, that amount is $7.25 per hour. In the state of Pennsylvania, the minimum wage is also $7.25. Because the state of Pennsylvania does allow for employers to take a tip credit, they may pay tipped employees a minimum of $2.83 per hour if the employee makes enough in tips where the hourly wage plus tips equals the minimum wage.
Pooling Tips
Pennsylvania law does allow employers to mandate tip sharing, tip pooling or “tipping out.” Employees receiving tips are only required to contribute what is reasonable and may also ensure that whatever they do keep meets the minimum wage requirements. The pool is only to be shared among qualified staff and may not be taken or held by the employer. Under federal law, if an employer takes a tip credit, then only those employees regularly making tips can participate in a tip pool.
If the employer does take a tip credit, they can only count the tips the employee gets to keep against the minimum wage requirement. To help make tip pooling easier, a tip pooling calculator is available and can be leveraged by establishments hoping to provide clarity and accuracy for employees.
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 Pennsylvania, this additional charge is not a tip and it should be noted that the establishment should inform the customer of this. If any portion of that service charge is shared with the service staff, then customers should be made aware of that as well.
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 (such as 3%), and that customer leaves a tip as part of the credit card payment, then in Pennsylvania, the employer may be allowed to deduct the employees share of the credit card processing charge the employee realizes. Pennsylvania employers may choose to keep the 3% credit card processing fee from the employee’s tip, as state law does not specifically address this issue.
Persons employed within the hospitality industry in Pennsylvania should have an understanding of the state’s rules and rites as well as an understanding of how their income may be impacted.