South Carolina Tip pooling and Tip credit Laws | TipMetric 2020
In South Carolina, service industry employees 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. To ensure employees understand the rules and protections for tipped employees within the state, they can visit the South Carolina Department of Labor, Licensing, and Regulation website.
Federal law states that tips belong to the employee, not the employer. Employers are not allowed to require employees to hand over their tips, with the exception of one of the following:
· A tip credit is allowed. Because South Carolina does not have a state-level minimum wage, the federal minimum wage of $7.25 is followed. Employers in this state are required to pay tipped service employees at least $2.13 per hour, as long as the employee earns enough in tips to meet the minimum wage requirements. If the employee makes less than that amount in tips, the employer must make up the difference.
· A tip pool is in place. Under federal law in almost all states, employees may be required to contribute a portion of their tips into a tip pool that is then shared with other employees. Employees are not required to share their tips with other employees who do not receive tips as part of their normal job. Employees, such as dishwashers or cooks, are not eligible to participate in a tip pool. In addition, employers, managers, or supervisors are not eligible.
There are helpful online resources to help employers and employees better understand how to use tip distribution software.
Multiple Jobs
There are cases where employees have more than a single job, doing some tasks that are non-tipped related. With a 2018 change to the federal law, when employees handle non-tipped duties during their shift, such as preparing salads or making coffee, the employer can take a tip credit for that time spent on non-tipped activities. Employers cannot take a tip credit for employee time spent on activities nonrelated to tipped duties, such as handling errands for the employer.
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 South Carolina, 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, and that customer leaves a tip as part of the credit card payment, the employer is allowed to deduct the employees share of the credit card processing charge in South Carolina.
Persons employed within the hospitality industry in South Carolina should have an understanding of the state’s rules and rites as well as an understanding of how their income may be impacted.